Preamble

The House met at half-past Two o'clock

PRAYERS

[Mr. SPEAKER in the Chair]

PRIVATE BUSINESS

MINISTRY OF HOUSING AND LOCAL GOVERNMENT PROVISIONAL ORDER (LEEDS) BILL

Read a Second time and committed.

Oral Answers to Questions — NATIONAL FINANCE

Higher Education (Robbins Committee's Report)

Miss Quennell: asked the Chancellor of the Exchequer when he expects the Robbins Committee to make its Report on Higher Education.

The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter): We hope to receive the Report towards the end of the summer.

Miss Quennell: I thank my right hon. Friend for that reply, which is more encouraging than the reply that he gave me last time. Will he impress upon this Committee the anxiety with which all educationists await the publication of its Report, and do everything he can to ensure that we receive it this summer?

Mr. Boyd-Carpenter: I am sure that the Committee and its chairman are well aware of the anxiety of all of us to receive its Report. On the other hand, the House will be aware that this is one of the most important Reports affecting educational matters that will ever have been produced. An enormous amount of work is being done on it, and I am certain that it would be very wrong to try to hurry it up.

Sir T. Beamish: In view of the great importance of this question, can my

right hon. Friend say whether there will be sufficient time between the receipt of the Report and the opening of Parliament for legislation to be foreshadowed in the Queen's Speech?

Mr. Boyd-Carpenter: I am afraid that I cannot go so far as that. It certainly will not be possible for publication to take place until the Summer Recess.

Income Tax (Schedule E)

Wingfield Digby: asked the Chancellor of the Exchequer how much of the £235 million deductions for expenses under Schedule E for 1961–62 related to Dorset, and how much related to the south-west of England.

Mr. Boyd-Carpenter: I am afraid that this information is not available.

Mr. Digby: Would it not be true to say that these tax concessions, like so many others, benefit only those living in the cities, and bear little relationship to life in the countryside and small towns?

Mr. Boyd-Carpenter: I would not say that. The Answer that I shall give to a later Question may in some measure reassure my hon. Friend on that point.

Wages, Salaries and Dividends

Mr. Ridley: asked the Chancellor of the Exchequer by how much, as a percentage, in real terms wages and salaries on the one hand and dividends on the other have risen between 1938 and the present day.

Mr. Boyd-Carpenter: Between 1938 and 1962 total wages and salaries rose by 443 per cent. and total gross ordinary dividends by 226 per cent. The latter figure has been adjusted to exclude dividends paid in 1938 by companies subsequently nationalised. The corresponding increases, in real terms, as measured by the consumers' price index, were 79 per cent. for wages and salaries and 8 per cent. for ordinary dividends.

Mr. Ridley: In view of the fact that those are very striking figures, will my right hon. Friend give them the maximum publicity? Will he further bear in mind, when considering the rather unfair distinction in the tax law between earned


and unearned income, what considerable disadvantages drawers of dividends start with?

Mr. Boyd-Carpenter: The latter part of my hon. Friend's supplementary question raises rather wider issues than I can deal with at Question Time, although we may have an opportunity for a discussion of this sort of thing later on today. On the first part of the question, it is important that all the facts of the matter should be known, and my hon. Friend's initiative in putting down a Question has been very helpful.

Mr. Callaghan: Since it is important that all the facts ought to be known, can we be given some of the facts about the amount of capital distributions, bonus shares and various other devices which have been employed for the last 10 years with the object of avoiding the payment of Income Tax by companies, and also to disguise the real increase in dividends? Are not these figures so striking as to cause very grave doubts about their validity? Is not the Chief Secretary really a little frightened to pretend that the increases are in this proportion, when everybody knows that the increases that have gone to shareholders are far greater than those figures show?

Mr. Boyd-Carpenter: The figures I have given are the official figures, and they are true. I am surprised that the hon. Gentleman, apparently, likes them so little that he tries to denigrate them. If he would be good enough to put down a Question, I will endeavour to give him answers on all the facts available. Whether he will like them, I do not know.

Galleries and Museums

Mr. Boyden: asked the Chancellor of the Exchequer on how many occasions in the last three years grants for the National Art Collections and Museums have had to be drawn on the Civil Contingencies Fund owing to inadequate annual purchase allocations being available to these Galleries and Museums.

Mr. Boyd-Carpenter: The Civil Contingencies. Fund was used 10 times in the three years ended 31st March, 1963, for special grants or advances for the purchase of particular works of art which

unexpectedly became available. This has of course nothing to do with the adequacy or otherwise of the regular purchase grants.

Mr. Boyden: Is not it in fact becoming a habit? Why should the Treasury equate the purchase of pictures for our national collections with hurricanes, floods and other disasters? Would not it be better if there were an adequate fund so that the collections did not have to depend on an emergency fund in this way?

Mr. Boyd-Carpenter: I do not think that the hon. Gentleman can have understood my Answer. There is a regular purchase grant to deal with the ordinary level of purchases. This fund covers the purchase of particular works of art. The works of art covered by these 10 grants represent an example of very striking pictures coming on to the market unexpectedly. It is sometime possible to help by the use of the Civil Contingencies Fund and to seize the opportunity, afforded by such works of art coming on to the market, to buy them.

Mr. Grimond: Is the Chief Secretary aware that a celebrated Scottish collection of pictures, the Cargill Collection, is coming on to the market? I do not expect an answer today, but will the right hon. Gentleman consider making a special grant for Scottish galleries to acquire some of the pictures?

Mr. Boyd-Carpenter: If an application is made, it will, of course, be considered; but I am sure the right hon. Gentleman will agree that that does not arise out of this Question.

Mr. Ridley: Can my right hon. Friend detail the very large increase which has taken place in the annual purchase grants in the last three years? Is he aware that many hon. Members on this side of the House are grateful and appreciative of the generous way in which he has handled the special grants in difficult circumstances?

Mr. Boyd-Carpenter: I am obliged to my hon. Friend. If he would care to put down a Question I will certainly circulate the details for which he asks.

Mr. Boyden: asked the Chancellor of the Exchequer why the Estimate for


1963–64 for Grants for the Arts, Vote VIII, 16, S, contains only £10,000 for assistance to local museums in schemes of mutual co-operation when his Standing Commission on Museums and Galleries recommended a sum of £100,000 per year.

Mr. Boyd-Carpenter: I would refer the hon. Gentleman to the reply given by my hon. Friend the Economic Secretary to my hon. Friend the Member for Exeter (Mr. Dudley Williams) on 19th March.

Mr. Boyden: Is the right hon. Gentleman aware that this scheme has been going for about six years and one of the reasons why it lags is inadequate central support? How much longer will it go on dragging before he gets the scheme thoroughly organised over the whole of the country?

Mr. Boyd-Carpenter: The hon. Gentleman related his question to the interesting Report of the Standing Commission. As he will see if he studies the Answer to which I have referred him, that was received only at the end of last year and published in March. It is under consideration in connection, no doubt, with next year's Estimates.

National Incomes Commission (Cost)

Mr. Lawson: asked the Chancellor of the Exchequer the estimated total cost of the functioning of the National Incomes Commission for the financial year 1963–64; and what amount of this sum will be members' salaries.

Mr. Boyd-Carpenter: £74,000 excluding accommodation and stationery, figures for which are not separately available. Of this £29,000 is for members' salaries.

Mr. Lawson: Does not the right hon. Gentleman consider that, instead of this sum of money coming out of the public purse, it ought to come out of the coffers of the Conservative Party?

Mr. Boyd-Carpenter: No, Sir; and I do not think that people outside who —whatever their views on particular issues—realise the crucial importance to our future of an incomes policy, will grudge this relatively small amount.

National Incomes Commission(Report)

Mr. Small: asked the Chancellor of the Exchequer if he will make a state-

ment on the recommendations of the National Incomes Commission in their report on the Scottish Plumbers' and the Scottish Builders' Agreements of 1962, Command Paper No. 1994.

Mr. W. Hamilton: asked the Chancellor of the Exchequer what action he intends to take on the Report of the National Incomes Commission, Command Paper No. 1994;and if he will make a statement.

Mr. Boyd-Carpenter: I think that we are indebted to the Commission for setting out so clearly and authoritatively its findings and recommendations, with its reasons, on the issues before it. Although the Report is concerned primarily with the Scottish plumbers' and builders' agreements which were under examination, it contains much which is of value in a wider context. I am sure that it can usefully be studied by all who are concerned with the determination of incomes and prices as they affect the national interest.

Mr. Small: Is the Chief Secretary aware that the case for the Scottish plumbers and their hours was freely negotiated between the trade unions and the employers, and does he think it wise to use the National Incomes Commission in respect of matters which have been adjusted in a forward-looking manner between the employers and the trade unions?

Mr. Boyd-Carpenter: If the hon. Gentleman studies the Report, he will see that it was well worth obtaining. I share his regret that the trade unions did not exercise their right to put their case to the Commission.

Mr. Hamilton: Can the right hon. Gentleman say why the Chancellor of the Exchequer referred this matter to the National Incomes Commission in the first instance? Can he tell the House why he expects that workers whose highest average earnings, according to Appendix F of the Report, amount to £15 8s. a week would accept any definition of the national interest from a Commission whose chairman is getting £240 a week for doing the job?

Mr. Boyd-Carpenter: This case was referred because, clearly, it comes within the class of case contemplated in the White Paper of November, 1962, as approved by Parliament. I think that the


Report indicates very clearly the value of that reference in the light of the very helpful recommendations obtained. I do not think that the hon. Gentleman's reference to the salary of the distinguished chairman is helpful or relevant.

Mr. Callaghan: Does not the Chief Secretary realise that this is a very expensive way of getting an essay on wages and hours which has been made available in other forms by a number of other bodies on previous occasions? As he has now answered by hon. Friend's question about what action he proposes to take, may I ask the right hon. Gentleman whether he will advise the Chancellor of the Exchequer that the sooner he abolishes this Commission—if he really wants to get an incomes policy working —the more likely he is to achieve that?

Mr. Boyd-Carpenter: One must remember the immense importance which, as I know the hon. Gentleman will agree, attaches to the proper development of an incomes policy in this country. I think that upon reflection the hon. Gentleman will agree that a contribution of this kind was well worth obtaining.

Mr. Callaghan: Is the right hon. Gentleman aware that in my view this Commission makes absolutely no contribution at all to the securing of a national incomes policy, that it is nothing but an irritant and that the Chancellor would be well advised to abolish it?

Mr. Boyd-Carpenter: I note the hon. Gentleman's view. But I am bound to say that I think that in this, as in so many other respects, he is in a conspicuous minority.

Mr. Manuel: asked the Chancellor of the Exchequer the nature of the representations he has received from the building trade operatives in Scotland following the publication of the National Incomes Commission Report, Command Paper No. 1994; and what was the nature of his reply.

Mr. Boyd-Carpenter: No such representations have been received. The question of a reply does not therefore arise.

Mr. Manuel: Is the right hon. Gentleman aware that representations will be coming forward? Is he aware that the

decision of the Chancellor of the Exchequer to refer this matter to the National Incomes Commission has roused deep resentment in the Scottish building industry, and that there is no doubt about that? Is he further aware that the accident rate in this industry is greater than in any other? Did the Chancellor give sufficient consideration to this before making the reference, and would not the right hon. Gentleman agree that there are many activities in this country which the Commission might explore before coming to the question of workers' wages and hours which have been freely arrived at after negotiation?

Mr. Boyd-Carpenter: If representations are coming forward in the future, they will be answered in the future. I cannot anticipate them. I do not believe that the interests or feelings of anybody could, or should, be hurt by an impartial analysis of the facts.

Mr. Gourlay: asked the Chancellor of the Exchequer if he will publish in the OFFICIAL REPORT the two tables on profits in the construction industry supplied by Her Majesty's Government to the National incomes Commission and referred to in paragraph 161 of the Commission's Report.

The Economic Secretary to the Treasury (Mr. Edward du Cann): Yes, Sir.

Mr. Gourlay: What steps does the Economic Secretary propose to take to enforce the 3½ per cent. limit on profits when he restricts increases in workers' wages to 3½per cent. per annum?

Mr. du Cann: There is another Question on that subject to which we shall come in a few moments. If the hon. Member will be patient, he will get the answer then.

Following is the information:

Note on Table N.

INCOME OF PUBLIC QUOTED COMPANIES
The Board of Trade compiles, on a standardised basis, aggregated accounts of public companies whose shares are quoted on a United Kingdom stock exchange and which are mainly engaged in manufacturing, construction, distribution and certain other services in the United Kingdom. Table N, derived from the statistics, shows for the years 1954 to 1961, gross income as a percentage


of gross assets of companies in the construction industries, with comparative figures for all companies included in the analysis. The percentage return on capital employed varies very widely from company to company, and even between industries there is considerable variation, as the table shows.

Over the years 1954 to 1960 the number of companies whose accounts were analysed and which were classified to construction varied between 67 in 1959 and 55 in 1954. The 1961 figures relate only to companies with assets


TABLE N


PUBLIC QUOTED COMPANIES


Company income as percentage of Assets, 1954–1961



Construction









Dividend and Interest Payments(c)





Year
Gross Assets (a)£
Gross Income(b)£
Income as percentage of Assets
£
As percentage of Assets
All quoted Companies Income as percentage of Assets
Highest percentage return on Assets (industry in brackets)
Lowest percentage return on Assets (industry in brackets)









(excluding Construction


1954
98,662
23,628
23·9
4,415
4·5
18·1
22·6 (Electrical Engineering and Goods)
14·3 (Tobacco)


1955
112,379
24,526
21·8
4,760
4·2
17·9
21·7 (Electrical Engineering and Goods)
13·6 (Tobacco)


1956
127,482
27,643
21·7
5,137
4·0
16·9
21·0 (Metal Goods)
14·3 (Tobacco)


1957
143,131
30,024
21·0
5,922
4·1
16·1
20·5 (Metal Goods)
13·1(Textiles)


1958
159,780
31,603
19·8
6,509
4·1
15·2
18·3 (Metal Goods)
9·7 (Textiles)


1959
177,034
31,950
18·0
7,167
4·0
15·9
19·1 (Vehicles)
13·1 (Textiles)


1960
193,765
31,273
16·1
7,659
4·0
16·0
19·4 (Retail Distribution)
13·3 (Textiles)


1960(d)
168,910
28,401
16·8
6,693
4·0
16·0
19·6 (Retail Distribution
10·1 (Leather, leather goods and fur)


1961(e)
185,296
30,029
16·2
7,220
3·9
14·2
19·2 (Miscellaneous Services)
8·5 (Ship-building and Marine Engineering)


NOTES


(a) Gross assets are fixed assets before deduction of depreciation, plus total current assets, less total current liabilities and provisions, except provisions for future tax. Changes in value of fixed assets arising from re-valuations have been eliminated as far as possible


(b) Gross income is trading profits (after deducting directors' fees and emoluments, pensions to past directors, superannuation payments, compensation for loss of office, auditors' fees etc.) and other income (from investments and other sources) before allowing for depreciation and other provisions, plus prior year adjustments, other than tax.


(c) Income tax deducted by companies from payments of dividends is treated as falling not on the companies but on the recipients of dividends. Hence dividends are gross before deduction of tax.


(d) Figures for 1954–1960 relate to all quoted companies; those for 1960–61 relate only to companies with net assets of £0·5 million or more.


(e) 1962 figures will be available at the end of February, 1963.



of over £0·5 million and the accounts of 50 construction companies were analysed in that year; of these 7 had a registered office in Scotland.

1962 figures will be available at the end of February, 1963.

Notes on the method of compiling the figures and on their limitations appear in Economic Trends in April, 1962, the Board of Trade Journal, 7th December, 1962, and the Ministry of Labour's Statistics on Incomes, Prices, Employment and Production.




TABLE P


PROFITS AS PERCENTAGES OF TURNOVER (a)


Great Britain


Percentages



1956–57
1957–58
1958–59
1959–60 (b)


Industry
Gross
Net
Gross
Net
Gross
Net
Gross
Net


Building and Contracting
7·0
5·6
6·8
5·0
7·1
5·1
6·4
4·4


Treatment of non-metalli-ferous mining products other than coal (including most building materials)
13·9
10·7
12·9
9·4
12·9
9·1
14·5
10·4


Mining and Quarrying other than coal
19·4
13·7
18·6
12·6
18·7
12·0
20·5
13·2


Chemicals
10·7
7·7
11·3
8·2
13·2
8·
14·6
10·1


Iron and Steel
12·1
7·7
11·5
8·2
11·6
8·2
11·5
7·1


Shipbuilding
9·1
7·8
9·5
8·1
8·4
6·6
9·5
6·9


Electrical Engineering
11·7
9·5
12·3
9·6
11·2
8·2
12·6
9·5


NOTES:


Gross Trading Profit less capital allowances equals net trading profit.


(a) Extraction from Report of Board of Inland Revenue.


(b) Confidential until end January—then published.

National Incomes Commission (Doctors' Pay Award)

Mr. W. Hamilton: asked the Chancellor of the Exchequer if he will refer to the National Incomes Commission the question of the recent pay award to doctors.

Mr. Boyd-Carpenter: No, Sir.

Mr. Hamilton: Why not?

Mr. Boyd-Carpenter: For the reasons already very clearly explained in the White Paper laid last November.

Mr. Hamilton: Is the right hon. Gentleman aware that these doctors got a very much greater increase than that for which the Scottish plumbers were asking, and yet the claim of the Scottish plumbers was referred to the National Incomes Commission? Is he aware that the 16 per cent. given to the doctors over three years represents more than 7 per cent. per annum, which is more than twice what the Chancellor of the Exchequer regards as in the national interest? Is this the way the right hon. Gentleman and the Government hope to get general acceptance of a national incomes policy, when there is such a great difference between the treatment of doctors and Scottish plumbers?

Mr. Boyd-Carpenter: If the hon. Gentleman studies the Report of the Review Body on the remuneration of doctors, he

will see, first, that it recommended that these proposals should run for at least three years. Secondly, it explicitly took account of changes taking place before the beginning of that period; and therefore the figure recommended—which is actually 14 per cent.—is spread over a number of years.

Profits

Mr. Ross: asked the Chancellor of the Exchequer if he will take steps to ensure that profits do not exceed an annual increase of 3½ per cent.

Mr. Ross: I should point out that the word "distributed" should come before the word "profits" in the Question.

Mr. du Cann: I think that rather alters the sense of the Question, but the Answer to the one on the Order Paper is that my right hon. Friend the Prime Minister gave an undertaking in this House on 26th July last that
the Government will, by fiscal or any other appropriate means, restrain any undue growth in aggregate profits which might follow from restraint in wages and salaries."—[OFFICIAL. REPORT, 26th July, 1962; Vol. 663, 1763]
The National Incomes Commission is required to have regard to this pledge and to report from time to time on the need, if any, for corrective action.

Mr. Ross: Surely if we want to get acceptance of this policy there must be


a sense of justice and fair play in respect of all forms of income. Any glance at any of our financial newspapers will show that ½ per cent. is certainly not regarded as applicable to them by many companies which are presently declaring very considerable increases in dividends. I have a list to which I could refer the hon. Member.

Mr. du Cann: I agree completely with what the hon. Member said in the first part of his supplementary question. As a matter of fact, ever since 1958 gross trading profits of companies increased at an average annual rate of 3½ per cent., which is precisely the figure commended by the hon. Member, and I do not see any need to take the suggested action.

Mr. Ross: The Question is not concerned with gross profits but with the growth of income by distributed profits, and the increase in the last 10 years has been over 160 per cent.

Mr. du Cann: The hon. Member will appreciate that there is some difficulty here because he is now asking a question somewhat different from that which appears on the Order Paper. If he will be good enough to table a fresh Question, I shall do my best to answer it.

Income from Rents

Mr. Willis: asked the Chancellor of the Exchequer if he will take steps to ensure that income from rents does not exceed an annual rate of 3½ per cent.

Mr. Willis: The Question should refer to an "annual increase".

Mr. du Cann: For the second time I shall do my best to answer. The Answer to the Question appearing on the Order Paper is: No, Sir. But I accept that it would be wrong if rental income—or indeed any other form of personal income —were to rise excessively in relation to the growth of the economy.

Mr. Willis: If the hon. Gentleman appreciates that it would be wrong for a larger increase to take place in income from rents than 3½ per cent., surely there is an obligation on the Government to do something about it? Otherwise, the whole of the business the Government are going through is a piece of nonsense.

Mr. du Cann: I do not art the moment see any need for corrective action. It

should be remembered that rent accounts for only 5 per cent. of total domestic incomes today compared with 9½ per cent. before the war. If there has been some increase in recent years, that is entirely due to the fact that rents have been artificially kept down for a very long time.

Mr. Callaghan: How does the hon. Gentleman reconcile that answer with his previous Answer? Is he not aware that since the new index was constructed, on 16th January, 1962, the increase in rents, which forms part of the retail price index, has been over 5 per cent.? How does he reconcile that with his view that it should not exceed an increase of 3· per cent? Will he take some action or does he want us to conclude that the Government's policy is to let prices go up and to keep wages down?

Mr. du Cann: The Government's policy is nothing of the sort, as the hon. Member knows very well that the figures show.

Purchase Tax (Self-Lift Chairs)

15. Mr. Walker: asked the Chancellor of the Exchequer whether he will exempt from Purchase Tax self-lift chairs purchased by persons who could obtain medical evidence of the need for such chairs.

Mr. du Cann: No, Sir. It is a general principle that Purchase Tax liability depends on the character of an article and not on its intended use in an individual case.

Mr. Walker: Is my hon. Friend aware that that is a very disappointing reply, particularly as these chairs are used almost exclusively by old people in homes and hospitals? Can he give further consideration to this matter?

Mr. du Cann: I will certainly look at the matter again as my hon. Friend asks, but I have already been into it with a great deal of care. He will recall that he has had substantial correspondence on the matter with the Treasury. He will, therefore, perhaps appreciate why the situation must remain as it is.

Mr. Mitchison: Who does the Treasury think use self-lift chairs other than invalids?

Mr. du Cann: It is not suggested that anyone else does. The point is that in the case of some of these chairs the self-lifting device would cost less than the amount of Purchase Tax, and if the regulations were changed there would be substantial scope for avoidance. It is in order to protect the Revenue that the current rates are kept.

Machine Tools (Design)

Mr. Dalyell: asked the Chancellor of the Exchequer how many courses are being held on the design of machine tools in higher educational institutions.

Mr. Boyd-Carpenter: The Manchester College of Science and Technology provides a diploma course in machine tool technology and design; it also provides a course in machine tool technology leading the degree of Master of Technical Science. In addition, there are many other full-time courses elsewhere in higher education, which deal primarily or substantially with machine tool technology. I am circulating a note about
these in the OFFICIAL REPORT.

Following is the information:

Courses including Machine Tool Technology

Fruit Juice (Purchase Tax)

Mr. J. Wells: asked the Chancellor of the Exchequer if he will remove the Excise duty on fruit juice where the fruit content is over 40 per cent., and in particular on blackcurrant juice.

Mr. du Cann: I assume my hon. Friend is referring to Purchase Tax. The Answer is "No, Sir".

Mr. Wells: Will my hon. Friend look at this matter again, because the Purchase Tax on all fruit juices is having a very harmful effect on the horticultural industry and serious repercussions in many parts of the country, particularly among smaller members of the farming community?

Mr. du Cann: I recognise the special interest and knowledge of my hon. Friend in this matter. It is good to see that sales are recovering somewhat, but I am afraid I must tell my hon. Friend frankly that this decision must stand.

Mr. Bence: Will the hon. Gentleman take action immediately, because the rapid increase in the price of sugar is making the position of manufacturers of fruit juices and soft drinks almost impossible? It is imperative that the Purchase Tax on these fruit juices should be removed because of the cost of sugar.

Mr. du Cann: I refer the hon. Member to a Written Answer I gave on the subject yesterday.

Credit Unions (Restrictions)

Mr. Dempsey: asked the Chancellor of the Exchequer if he will take steps to increase the limit which at present applies to the sums which may be invested in credit unions.

Mr. du Cann: I know of no general restrictions on credit unions of the kind to which the hon. Member refers.

Mr. Dempsey: Is the Minister aware that a group of responsible individuals in Coatbridge led by people who have associations with the credit unions from the Colonies, and from Canada and America, have attempted to establish such an organisation, but they were assured by the Treasury that the maximum imposition for an individual subscriber is £50; and, as a result, this inhibits the development of the scheme? Is the hon. Gentleman aware that the purpose of the scheme is to lend for housing improvements at an interest rate of from 1 per cent. to 2 per cent.? Is not that something to be desired? Will the hon. Gentleman look at the matter again?

Mr. du Cann: I am happy to answer the final part of that supplementary question in the affirmative. If the hon. Member writes to me giving full details of what he has in mind, I shall do my best to help him, but the point at the moment is that we cannot be clear what he has in mind. I repeat that I shall be very ready to help him if he lets me know what he wants.

Mr. Dempsey: Is the Minister aware that I wrote to him? Is he further aware that I gave him an illustration of the scheme and of the effect of this imposition which the Treasury insists upon, which must be abolished?

Mr. du Cann: No, Sir. I am not aware that the hon. Member has written to me, or I should not have given the Answer I gave. As he has brought the matter to my attention, I shall, of course, look into it.

India (Aid)

Mr. Prentice: asked the Chancellor of the Exchequer whether he will make a further statement on economic aid for India; and what position has been reached in the discussions on this subject by the consortium of powers providing this aid.

Mr. Boyd-Carpenter: The question of the possibility of further economic aid for India is under discussion, and the Consortium of donor countries will meet again in Paris on 4th June. The House will be well aware of the heavy commitments we in this country have already undertaken in respect of both military and civil aid for India.

Mr. Prentice: Will the right hon. Gentleman confirm or deny—I hope he will deny—reports which have appeared in the Press during the past few days that we intend to reduce the economic aid because of the increased military aid?

Mr. Speaker: Order The form of that question is a little out of order. One may not ask a Minister to confirm or deny reports in the Press for which the Minister is not responsible. Perhaps the hon. Member can turn the question round in some way.

Mr. Prentice: I apologise, Mr. Speaker. Will the right hon. Gentleman say whether it is the Government's intention

to increase or decrease economic aid to India? Does he agree that in the present situation it is urgent to increase economic aid, nor least for strategic reasons?

Mr. Boyd-Carpenter: I cannot go further about economic aid than my main Answer, which includes the statement that the members of the Consortium are meeting on 4th June.

Mr. Callaghan: Does not the right hon. Gentleman realise that it would be regarded as extremely unsatisfactory if the Government said that they must do a bargain with India, and that, because we have supplied increased military aid, we shall have to decrease the amount of economic aid? Is he aware that if he takes that view Members on both sides of the House will find themselves in disagreement with the Government?

Mr. Boyd-Carpenter: The hon. Member's question consists of two hypotheses. I feel no necessity to comment on either of them.

Fishermen's Boats and Gear

Mr. Emrys Hughes: asked the Chancellor of the Exchequer what communication he has recently received from the Secretary of the Clyde Fishermen's Association on the question of fishermen's boats and gear being considered mobile equipment for the purposes of taxation; and what was the nature of his reply.

Mr. Boyd-Carpenter: My right hon. Friend received a letter from this Association on this subject and a reply has been sent on his behalf. This explains the objections to this proposal on the lines of what was said by my hon. Friend the Financial Secretary in reply to an Amendment on Tuesday.

Mr. Emrys Hughes: Is the Minister aware that the lack of understanding and sympathy shown in this correspondence is calculated to make every fisherman on the Clyde seasick?

Mr. Boyd-Carpenter: That is, indeed, putting it very high.

Mr. Hector Hughes: Is the rule which the right hon. Gentleman has just adumbrated to apply to all fishermen, including those in north-east Scotland, or is it an invidious practice relating only to the Clyde fishermen? How much does


the right hon. Gentleman expect to raise by this means? Does he realise that it is an imposition on the fishing community, which is already hard hit?

Mr. Boyd-Carpenter: I did not adurnbrate any rule whether with respect to the Clyde or with respect to the North-East Coast. The hon. and learned Member spoke of an imposition. What we were discussing was a very generous tax allowance made in the Finance Bill.

Save The Children Fund

Mr. Mason: asked the Chancellor of the Exchequer if he is aware that the £226,000 granted to the Save the Children Fund from the Lord Mayor of London's Hungarian Refugee Appeal Fund was given on the understanding that it was to help Hungarian refugee children in Austria; what was the nature of the undertaking received by his Department before consent was granted to transfer this money abroad; and, in view of the fact that none of it has been used for that purpose, if he will not allow any more exchange control applications by this organisation.

Mr. du Cann: All I can add to my Written Answer on 30th April to my hon. Friend tie Member for Bournemouth, West (Mr. Eden) is that any further applications would, as in the case of all bona fide charitable organisations, require to be supported by a satisfactory assurance that the funds will be put to a genuine charitable use.

Mr. Mason: Many charges are being made against the Save the Children Fund by the Direct Aid to the Refugees in Europe on the ground that it has misappropriated funds, and that £226,000 has not been used for the care of Hungarian refugee children. Is the hon. Gentleman aware that these charges, and counter-charges by the Save the Children Fund against D.A.R.E., are causing immense harm to both these charitable organisations and many others and that many people are losing faith in these charities? Does he not feel that there ought to be an inquiry to clear up the matter once and for all?

Mr. du Cann: I think that the important part of the hon. Member's supplementary question relates to the point that there appear to be two sides to this matter.

Dr. Stross: Is the Minister aware that the Save the Children Fund is one of the most reputable organisations in this country or anywhere? Having served it myself for the last 13 or 14 years, I assure my hon. Friend the Member for Barnsley (Mr. Mason) that I shall be glad to give him details so that he will know in future that some of this information is quite wrong.

Mr. du Cann: The hon. Member has been good enough to illustrate my point.

RHODESIA AND NYASALAND

Chrome

Mr. Biggs-Davison: asked the First Secretary of State what requests have been received from the Federal Government of Rhodesia and Nyasaland for representations to be made in Washington on behalf of the Federal Government about the purchase of Soviet chrome sold at less than the cost of production and delivery, so undercutting Rhodesian chrome.

The First Secretary of State (Mr. R. A. Butler): The Federal Government made known to us their concern over trends in the international trade in chrome and have recently requested any assistance we can give them.

Mr. Biggs-Davison: Will the Government make strong representations about this? Does not my right hon. Friend think that this action on the part of the United States reveals a grave defect in the Western Alliance?

Mr. Butler: No, Sir. The subject of this chrome is now being discussed in two international bodies, of which the United States is a member. They are, therefore, aware of our views. We are taking part in these discussions.

Mr. Fernyhough: Will the right hon. Gentleman say whether the Government still believe in competition or do not believe in it?

Mr. Butler: We certainly believe in competition. We also believe in the vital nature of the sales of chrome to the Federation.

CENTRAL AFRICA

Federation

Sir T. Moore: asked the First Secretary of State whether it has been decided to abolish the Central African Federation; and what are his proposals in regard to the formation of an alternative association with similar ideals.

Mr. R. A. Butler: I have nothing further to add to my statements of 1st April and 21st May.

Sir T. Moore: As far as I remember, these were about forthcoming conversations which were to take place with the various members of the Federation. During these conversations, negotiations, or whatever they may be, will my right hon. Friend try to make sure that the new Association, or whatever it may be, will embody the multi-racial ideals and the safeguards which Sir Roy Welensky applied to the Federation?

Mr. Butler: As I said in my statement a day or two ago, we hope to organise a conference to consider both the dissolution of the Federation and the future, and we shall certainly attempt to maintain and to perpetuate all the best things which the Federation was able to achieve.

Mr. Mason: How long will it take to unscramble Nyasaland from the Federation? In view of the fact that the right hon. Gentleman has given Northern Rhodesia the right to secede, may I ask when he expects that to be complete? Will he keep in mind the desire of many hon. Members, and members of the Central African Federation, that there should be a continuing economic alliance, particularly having in mind the Central African Economic Council, which will be to the benefit of all the people concerned in those countries?

Mr. Butler: I cannot give an exact date in answer to the question about Nyasaland. Work is proceeding—namely, the transfer of functions and all the organisation of the future of the debt, assets and liabilities and so on. That is making quite satisfactory progress. In respect of Northern Rhodesia and Southern Rhodesia, we count more on the forthcoming conference. I accept what the hon. Member said about the importance

of maintaining economic ties in view of the great achievements of these two territories together in the past.

HOME DEPARTMENT

Sheep Stealing

Mr. Kitson: asked the Secretary of State for the Home Department how many convictions there have been in England and Wales for sheep stealing over the last three years.

The Joint Under-Secretary of State to the Home Department (Miss Mervyn Pike): I regret that separate statistics for sheep stealing in England and Wales are not available. The numbers of persons convicted of larceny of horses, cattle and sheep under Sections 3 and 4 of the Larceny Act, 1916, were 48 in 1959, 36 in 1960 and 62 in 1961.

Mr. Kitson: Does my hon. Friend appreciate that the penalties for sheep stealing are very often lighter than those imposed for poaching? Has not the time come to revise these penalties? Does she not appreciate that there is a great number of undetected cases which the police ought to make a greater attempt to detect because the situation is getting rather out of hand, particularly in the uplands in the Dales?

Miss Pike: I appreciate the seriousness of this problem in the Dales and in parts of Leicestershire, but I remind my hon. Friend that the maximum penalty for sheep stealing is 14 years' imprisonment.

Death Certificate (Issue)

Mr. K. Robinson: asked the Secretary of State for the Home Department what study he has made of the report of a committee of the British Medical Association relating to death certificates, postmortem examinations and kindred matters, a copy of which has been sent to him; and if he will now introduce amending legislation which will, inter alia, require a doctor to examine the body before issuing a death certificate.

The Joint Under-Secretary of State to the Home Department (Mr. C. M. Woodhouse): I understand that the report referred to has been prepared by a committee of the Association and is awaiting


consideration by the Council. When my right hon. Friend receives it he will of course consider its recommendations in consultation with my right hon. Friends the Minister of Health and the Secretary of State for Scotland.

Mr. Robinson: Is the hon. Gentleman aware that there has been a good deal of concern for some time because doctors are not required to examine bodies before giving death certificates and that there is a reluctance to accept the argument that this would place too great a burden on the medical profession? Now that the medical profession seems to be coming round to the idea, will he give the matter consideration when he gets the report?

Mr. Woodhouse: I am aware of this concern, because we have seen the Report although, despite the assertion in the Question, we had to go out and buy it for ourselves. As I indicated in the original reply, many of the matters which are covered are the responsibility of other Departments. This matter falls to my right hon. Friend the Minister of Health, but I will convey the hon. Member's point to him.

Mr. Kershaw: Will my hon. Friend look into this rather carefully because on many occasions relatives of those who have died in hospital have been very distressed as to whether a post mortem should or should not have been ordered? The situation is not satisfactory.

Mr. Woodhouse: I assure my hon. Friend that the matter will be very carefully looked into, but as I indicated, some of the recommendations are the responsibility of other Departments.

Judges' Rules (Review)

Mr. Fletcher asked: the Secretary of State for the Home Department whether the Lord Chief Justice and his colleagues have now completed the review of the operation of the Judges' Rules referred to them in March, 1961; and if he will publish their Report.

The Secretary of State for the Home Department (Mr. Henry Brooke): I am informed that progress is being made with the review and that any revised Rules will in due course be published and brought to the attention of the police and others concerned.

Mr. Fletcher: I thank the right hon. Gentleman for that reply. Is he aware that there is a great deal of concern in some quarters that the Judges' Rules are not being observed as they should be? Is it not desirable that, since this point has been under review for over two years, the Lord Chief Justice and his colleagues should be asked to produce the Report without further delay?

Mr. Brooke: The hon. Member will appreciate that this is not a matter wholly in my hands; but I know that it is hoped that they will be ready to present their Report by the end of the year.

Legal Proceedings Against Justices and Clerks (Working Party's Report)

Mr. C. Royle: asked the Secretary of State for the Home Department if he has been able to give consideration to the Report of the Working Party on the Expenses of Legal Proceedings Against Justices and Clerks; if legislation is to be introduced; and if he will make a statement.

Mr. Brooke: The Government accept in principle the recommendations of the Working Party and will introduce legislation to give effect to them when opportunity offers.

Mr. Royle: While accepting that reply with sincere thanks, may I ask the right hon. Gentleman if he will treat this matter with urgency in the light of some recent cases?

Jury System (Committee)

Sir B. Janner: asked the Secretary of State for the Home Department whether he has now heard from the persons invited to serve on the committee for inquiring into the jury system; whether he will state the names of those appointed to the Committee; and whether he will ask the Committee to report within a maximum period of one year.

Mr. Brooke: I will, with permission, circulate the list of members of the Committee in the OFFICIAL REPORT. I am grateful to them for accepting my invitation to serve. I am sure that the Committee will produce its report as soon as possible; I do not think it would be


right to ask it to do so by a particular date.

Sir B. Janner: Is the right hon. Gentleman aware that his remarks mean that this may be delayed for years? Is he prepared, in the meantime, to support a Measure if it is introduced to deal with the obvious anomalies which now exist?

Mr. Brooke: I have appointed such an excellent Committee that I am sure that it will not take years over this important job.

Following is the list:

Chief Enahoro

Mrs. Castle: asked the Secretary of State for the Home Department whether he will state the precise terms of the assurance he received from the Prime Minister of Nigeria on 11th March regarding the admission to Nigeria of counsel for the defence of Chief Enahoro; and whether he was then or at any other material time given to understand that particular counsel would be refused entry to Nigeria.

Mr. Brooke: The assurance I received from the Prime Minister of Nigeria was in the terms which I communicated to the House on 14th March, namely, that the undertaking which had been given to the Divisional Court and the Appeal Committee of the House of Lords on behalf of the Nigerian Government meant that, if the Chief Justice of Nigeria gave his certificate for a named English barrister to appear for Chief Enahoro, the Nigerian Government would not refuse that barrister entry to Nigeria merely because he was going to represent Enahoro, and that they would not refuse him entry unless in his particular case there were other and good reasons.
From the outset I connected the form of this assurance in my mind with the publicly known facts that last year,

though they were not going there to defend Enahoro, the hon. and learned Member for Ipswich (Mr. D. Foot) had been expelled from Nigeria and Mr. Gratiaen had been refused admission to the country; and the Nigerian Government then disclosed to me in confidence that they would admit any other British counsel to defend Enahoro, but not either of these two gentlemen.

Mrs. Castle: Is it not a fact that the Home Secretary has deliberately withheld this information from the House? Is it not also a fact that in his affidavit to the Divisional Court on 25th April he led the court to believe that completely satisfactory assurances had been received by him from the Prime Minister of Nigeria on 11th March which would ensure that Chief Enahoro would be allowed the counsel of his choice and that no barrier would be put in the way of his counsel entering Nigeria? Is he aware that if he had not given the Divisional Court that deliberate impression it might well have been that the court would have allowed Chief Enahoro's application for relief under the Fugitive Offenders Act? Has the right hon. Gentleman not once again been guilty of duplicity, and ought he not to resign his office?

Mr. Speaker: The last expression in all that must be withdrawn.

Mrs. Castle: On your instruction, Mr. Speaker, I will withdraw the word "duplicity"—but I repeat that the right hon. Gentleman ought to resign his office.

Mr. Brooke: The hon. Lady is mistaken in the allegations she makes. The undertaking in the first instance was given not to me but to the Divisional Court and, therefore, the Divisional Court was well aware of it. The matter was further clarified before the Appeal Committee of the House of Lords. I could not possibly have known at the time whether Chief Enahoro would wish for a British or Nigerian barrister to defend him. The essential point which I did know was that if he could have any British or Nigerian lawyer, except two, to defend him he could be certain of being very ably defended.

Mr. H. Wilson: Is the right hon. Gentleman aware that there has been no more flagrant case of the misleading of this House in recent years? Is he aware


not only of the quotation that has been given of his own from HANSARD, but that the Attorney-General said in these terms in the House:
…they should be assured that he should have the counsel of his choice from all those qualified to appear."—[OFFICIAL REPORT, 21st March, 1963; Vol. 674, c. 678.]
There was no clarification made by the Attorney-General. Is the right hon. Gentleman aware that the House was given a clear and specific undertaking by the Attorney-General, who did not wriggle at all in this matter, as we are now told that the Home Secretary did? Is the right hon. Gentleman further aware that in his affidavit to the court, having referred to the doubts expressed by the court he said:
…questions had been asked in the Appeal Committee of the House of Lords about the form and effect of this undertaking…I received…an assurance of a satisfactory character from the Prime Minister of Nigeria.
Is he aware that what he has told us this afternoon is a direct denial of the impression he gave to the House and the court? If the right hon. Gentleman knew at that time that my hon. and learned Friend the Member for Ipswich (Mr. D. Foot) would not be allowed to go, why did he not tell the House at that time? Why did he mislead both the House and the court, and does he think that he would have got his proceedings through the House had he been honest with hon. Members?

Mr. Brooke: No, Sir; I misled no one, and the assurance to which I referred in that affidavit was an assurance which had already been explained to the House and which had not been challenged when I explained it—an assurance which had originally been given to the Divisional Court and the Appeal Committee of the House of Lords, and it seemed to them to be satisfactory.

Lieut.-Colonel Cordeaux: Is not my right hon. Friend aware that the hon. and learned Member for Ipswich conducted the case of Chief Enahoro in this country during the whole period and that, therefore, it must surely have been obvious that that hon. and learned Gentleman would have been the one whom Chief Enahoro would have wished to conduct his defence? Is my right hon. Friend really telling us, therefore, that he had no idea who Chief Enahoro would wish to choose to represent him?

Mr. Brooke: It certainly was not for me to ask, and I would remind my hon. and gallant Friend that the Lord Chief Justice himself in these proceedings said:
I quite appreciate that this applicant may not want counsel from this country; it would be quite wrong to ask him today whether he did".

Mr. H. Wilson: But did not the right hon. Gentleman himself last week refer, in somewhat improper circumstances, to my hon. and learned Friend the Member for Ipswich—it is within the recollection of the House—as "Chief Enahoro's counsel"? Did he not himself use that phrase, so was it not perfectly obvious, even to him, that my hon. and learned Friend was at that time and would be likely to be the counsel? This next point must be put to the right hon. Gentleman and he will find it difficult to acquit himself of this charge. Is he aware that statements have appeared referring to a conversation between himself and a learned judge about this case? Would the right hon. Gentleman say whether there have been any conversations between himself and a learned judge and, if there have, may we have a full report on them?

Mr. Brooke: No, Sir. I know of no such conversations. In regard to the right hon. Member's earlier question, I referred to the hon. and learned Member for Ipswich as Chief Enahoro's counsel because anyone who followed these proceedings would have known that he was his counsel—[HON. MEMBERS: "Oh."] at the time when the assurance was given in court to the Lord Chief Justice and, indeed, in those very proceedings Mr. Gratiaen was specifically mentioned; so all these matters were matters of public knowledge.

Mr. Grimond: Is the right hon. Gentleman really saying that he knew all the time that the counsel whom Chief Enahoro would want would be the hon. and learned Member for Ipswich and that, in spite of that, he did not make it crystal clear to the House that he was precisely the counsel Chief Enahoro would not be allowed to have? The right hon. Gentleman must surely have realised that it was exactly with this point that the House was concerned and, considering that this whole matter arose over a very unfortunate misunderstanding under which Chief Enahoro came to this country at all,


would it not have been much better for the right hon. Gentleman to have made it crystal clear that this undertaking was of no value about the counsel most directly concerned? Has the right hon. Gentleman made representations to the Nigerian Government that the hon. and learned Member for Ipswich should be allowed to defend him?

Mr. Brooke: As to the latter part of the right hon. Gentleman's supplementary question, there is a Question on the Order Paper to one of my right hon. Friends. On the former point, I knew, and the whole world knew, that the hon. and learned Member for Ipswich had acted for Chief Enahoro in his case before the Divisional Court, but neither the Lord Chief Justice nor I could know what barrister Chief Enahoro would wish for—[HON. MEMBERS: "Oh."]—whether British or Nigerian, if he were returned— [Interruption.]—to Nigeria. Indeed, the right hon. Member for Orkney and Shetland (Mr. Grimond) seems to have changed his view, because on 21st March he said in the House:
I am puzzled"—
referring to me:
…why he attaches such importance to the fact that a barrister from this country should be able to represent Chief Enahoro".— [OFFICIAL REPORT, 21st March, 1963; Vol. 674 c. 604.]

Several Hon. Members: rose—

Mr. Speaker: Order. It is quite clear that we cannot have a debate on this matter in the middle of Question Time.

Mr. H. Wilson: On a point of order—

Mr. Speaker: Perhaps we may have one more supplementary question.

Mr. Grimond: Does not the Home Secretary appreciate that there are two points—

Mr. Wilson: Mr. Speaker—

Mr. Speaker: There is now utter confusion, as a result, no doubt, of my trying to pay what was perhaps undue favour to the Leader of the Opposition.

Mr. Wilson: I rose on a point of order, Mr. Speaker.

Mr. Speaker: I beg the right hon. Gentleman's pardon.

Mr. Wilson: I did not wish to pursue the matter with a further question, Mr. Speaker, but when you said that there could be a further question I naturally sat down. The point of order is that the House will wish to pursue the matter further next week, on a Motion of censure on the conduct of the right hon. Gentleman.

TRUNK ROAD, LANARKSHIRE (PEDESTRIANS)

Miss Herbison: asked the Prime Minister if he will appoint a committee to inquire into the means of alleviating danger to pedestrians whose homes are situated in close proximity to a trunk road; and if he will ensure that such a committee will examine the need to eliminate the danger to pedestrians at Moodiesburn, Lanarkshire.

The First Secretary of State (Mr. R. A. Butler): I have been asked to reply.
No, Sir. This is a matter which can only be dealt with satisfactorily in the light of local conditions where the danger may arise.

Miss Herbison: Is the right hon. Gentleman aware of the very grave dangers in this part of Lanarkshire mentioned in my Question? Is he also aware that his right hon. Friend the Secretary of State for Scotland will neither erect an overhead bridge nor construct an underway path for the thousands of families living in the area? Finally, is he aware that there have been many fatal accidents on this road, with its very fast-moving traffic? If he will not set up a committee, will he use his influence with the Secretary of State for Scotland to provide some safe means by which these people can cross the road?

Mr. Butler: I have acquainted myself with the problems that affect this area, and the accidents that have occurred. I have also studied the correspondence between my right hon. Friend the Secretary of State and the hon. Lady. I can only say that the matter is now in the hands of the Lanarkshire County Council, which will make positive proposals to deal with the matter. I will certainly speak with my right hon. Friend the Secretary of State for Scotland with a view to forwarding suggestions.

NUCLEAR TESTS

Mr. A. Henderson: asked the Prime Minister whether, following the recent exchange of letters between President Kennedy, Mr. Khrushchev and himself, it is now intended to hold a Foreign Ministers Conference at Geneva on the problem of banning nuclear tests.

Mr. Prentice: asked the Prime Minister if Her Majesty's Government will now make new proposals to break the deadlock in the negotiations for a nuclear test ban treaty.

Mrs. Butler: asked the Prime Minister what recent discussion he has had with President Kennedy about steps which can be taken to prevent further deterioration in the nuclear test ban position, and, in particular, the acceptance of Russian proposals for three on-site inspections annually.

Mr. Allaun: asked the Prime Minister if, in view of the latest evidence that any significant series of nuclear test explosions would be almost impossible to conceal, he will now ask President Kennedy to agree to the Soviet proposal for a test-ban treaty including three on-site inspections annually and three automatic detection posts.

Mr. R. A. Butler: I have been asked to reply.
President Kennedy and my right hon. Friend have made a new approach to Mr. Khrushchev. His reply was received only recently, and is still under study. Any statement by me would therefore be premature at present.

Mr. Henderson: Will the First Secretary convey to the Prime Minister the suggestions we should like to make from this side of the House? First of all, in view of the continued deadlock, is it not time that the Foreign Ministers took over these negotiations at the Geneva Conference? Secondly, could we not bring to an end this interminable argument about the number of on-site inspections each year, and propose a longer term of years—say, five or six—and relate the number of on-site inspections to that term of years? Could we not have an entirely different approach with a view to ending this deadlock?

Mr. Butler: The initiative has been taken to reply to Mr. Khrushchev, and I will certainly convey the constructive ideas of the right hon. and learned Gentleman to my right hon. Friend.

Mr. Prentice: Is the right hon. Gentleman aware that the conversations that took place at Chequers on Saturday gave rise to some expectation that there might be an initiative to propose a compromise on the number of on-site inspections? Would the right hon. Gentleman agree that, if this is to be done, there is an urgency about it before some major new series of tests begins on either side?

Mr. Butler: This matter was discussed at Chequers very fully, and that has resulted in further collaboration between my right hon. Friend and the President of the United States. It is hoped that something will come of this initiative.

Mrs. Butler: Does not the right hon. Gentleman think that the acceptance by the Russians of the principle of inspection was a major concession which ought to be reciprocated by the West? Is he aware that many people feel that this insistence on a few additional annual inspections is intolerable hair-splitting, in view of the unimaginable consequences that will follow failure to get a test ban? Has the Prime Minister urged President Kennedy to take a personal initiative to try to secure agreement?

Mr. Butler: The problem is that the scientific advice we receive is that the Russian proposal for three on-site inspections annually would still be inadequate. That is a matter of opinion, but that is the advice we receive. There is no obstruction. We are trying to proceed on a new initiative in the matter.

Mr. Frank Allaun: Has not the right hon. Gentleman seen the evidence given last month by American scientists that the risk of an undetected test is minute? Does he agree with that? Whatever that risk, is it not smaller than the risk of the alternative, which is a complete breakdown of the talks and the arms race getting completely out of control?

Mr. Butler: We have been into this question of undetected tests, but I must


say that our scientific advice is that it is very difficult to accept the view expressed by the hon. Member for Salford, East (Mr. Frank Allaun).

Mr. P. Noel-Baker: Did the Prime Minister and President Kennedy offer in their letter to meet Mr. Khrushchev? Does the First Secretary recall that in their letter to Mr. Khrushchev in February, 1962, they said that they would be ready at any time to go to Geneva to break the deadlock?

Mr. Butler: I am not at liberty to explain or to expound the contents of the recent initiative, as I said in my original reply, but I think that any possibility of a meeting must be held in mind in view of the extreme seriousness of the issue.

SECRETARY OF STATE FOR THE COLONIES

Mr. Healey: asked the Prime Minister whether, in view of the growing number of urgent colonial problems, in British Guiana and elsewhere, requiring attention and decisions, he will now appoint a separate Secretary of State for the Colonies.

Mr. R. A. Butler: I have been asked to reply.
I would refer the hon. Member to the Answer which my right hon. Friend gave him on 22nd November last.

Mr. Healey: Is the First Secretary aware that there are now a large number of urgent, and even dangerous, colonial problems that have been waiting in vain for the attention of the Commonwealth and Colonial Secretary; in particular, a grave danger of complete breakdown of public order in British Guiana which could impose serious strains on the British strategic reserve? In view of the valuable precedent set by the appointment of the First Secretary of State to look after the problems of Central Africa, will the right hon. Gentleman ask his right hon. Friend the Prime Minister to appoint a separate Secretary of State to deal with colonial questions, so that these territories may now receive the attention they need, and deserve?

Mr. Butler: While I am aware of the position in British Guiana, and of the

difficulties arising in other parts of the world, I am authorised by my right hon. Friend the Prime Minister to say that he has complete confidence in the handling of these matters by my right hon. Friend the Commonwealth and Colonial Secretary. Therefore, the reply that I must give to the hon. Gentleman is the same as he was given before by the Prime Minister.

Mr. H. Wilson: Does not the right hon. Gentleman realise that that is just what worries us? Is he aware that there has been no Ministerial decision on the problems of British Guiana for the last month; that it is impossible to get the Secretary of State to give his attention to the question at all, and that the need for a visit to British Guiana by a Minister of high standing is very urgent indeed if we are not to face a very serious crisis there? Will the First Secretary arrange either that a senior Minister goes to British Guiana, with a policy to carry out, or, failing that, that a delegation goes from this House, with one or two senior Members from both sides, to examine this very critical situation?

Mr. Butler: We must be governed in our attitude to British Guiana by the realisation that it is internally self-governing, but in view of the seriousness of the situation there, and in view of the fact that the general strike began on 20th April and that a state of emergency was proclaimed on 8th May, I will undertake to discuss any constructive suggestions with my right hon. Friends concerned.

FIRST SECRETARY OF STATE (SPEECH)

Mr. A. Lewis: asked the Prime Minister whether the public speech made by the First Secretary of State on 15th May at the British Engineers Association lunch, making reference to future tax cuts, represents the policy of Her Majesty's Government.

Mr. R. A. Butler: I have been asked to reply.
I did not in fact forecast further tax cuts. What I did was to reaffirm the Government's intention to take whatever steps are necessary to secure the expansion of the economy. In emphasising this resolve my remarks certainly


represented the policy of Her Majesty's Government which has repeatedly been made clear.

Mr. Lewis: Did the First Secretary of State advise those at the luncheon of the fact that the Chancellor of the Exchequer at the time of the last General Election also introduced tax cuts just before the election and when the Tory Government came back they put those taxes back with interest? If the right hon. Gentleman did not do that, will he remind the people of the country now?

Mr. Butler: I made no such observations at the luncheon. I simply reminded my hearers that there are powers, which are referred to in the recent Budget, which are available for dealing with difficulties in the economy at any time. We have still problems in the North-East and other regions and it is our determination to maintain an active control of the economy.

Mr. Shinwell: Are there not going to be any further tax cuts?

Mr. Butler: No such statement has been made by me or anybody else.

Mr. Callaghan: Whatever the First Secretary of State said, did he obtain the consent of the Chancellor of the Exchequer? Was his statement made with the Chancellor's approval, as it appeared in the Press? Secondly, is the right hon. Gentleman aware that, with the rises in prices which have taken place over the last eighteen months, any decrease of Purchase Tax which is less than 10 per cent. will do no more than put prices back where they were then?

Mr. Butler: I have no observations to make on the latter part of the supplementary question. As to the first part, the Chancellor of the Exchequer and I work in perfect harmony.

BUSINESS OF THE HOUSE

Mr. H. Wilson: May I ask the Leader of the House to state the business of the House for next week.

The Chancellor of the Duchy of Lancaster (Mr. lain Macleod): Yes. Sir. The business for next week will be as follows:

MONDAY, 27TH MAY—Finance Bill.

Further progress in Committee.

TUESDAY, 28TH MAY—Remaining stages of the Television Bill.

WEDNESDAY, 29TH MAY—Private Members' Motions until seven o'clock.

Finance Bill.

Further progress on the Committee stage, which it is hoped to complete on THURSDAY, 30TH MAY.

FRIDAY, 31ST MAY—It will be proposed that the House should rise for the Whit-sun Adjournment, until MONDAY, 17TH JUNE.

Mr. H. Wilson: First, is the right hon. Gentleman aware that although we will facilitate, as far as it is reasonable, progress on the Television Bill, there cannot be any guarantee that the proceedings will be completed in that one day?
Secondly, will the right hon. Gentleman now take account of the fact, in planning next week's business, that tonight we shall table a Motion of censure on the Home Secretary in respect of his gross misleading of the House?
Thirdly, may I ask the right hon. Gentleman about the possibility of a statement next week in view of the fact that Ministers, at private meetings upstairs, have been giving information about proposed dockyard cuts?

Sir K. Pickthorn: How does the right hon. Gentleman know?

Mr. Wilson: Nothing done by this Government fails to get into the Press within the hour.
In view of this highly improper leakage to certain hon. Members, is the right hon. Gentleman aware that there is a general desire in the House that a full statement should be made to the House and the country so that people in these areas can be informed? Will the right hon. Gentleman therefore give an undertaking that a statement will be made on this question during the course of next week's business?

Mr. Macleod: First, on the Television Bill, I understand, of course, that it is the usual position that there cannot be any guarantee, but no doubt those in charge of the Bill on both sides of the House will consult as we go along. We will see what progress is made.
The third point which the Leader of the Opposition made is a matter which I shall be discussing with my noble Friend and the Civil Lord. I cannot give an undertaking, in the sense that the right hon. Gentleman asks for, but I will see that the point is considered.
On the right hon. Gentleman's second point, I heard the exchange that took place on Question No. 40 and the announcement of the Leader of the Opposition. I should like to make a short business statement tomorrow at eleven o'clock in the light of that announcement and its effect upon next week's business. We would, of course, wish to take up at once the quite unwarranted attack which the right hon. Gentleman has made on my right hon. Friend.

Sir D. Walker-Smith: Is my hon. Friend in a position to add to the information which he gave last week in answer to my hon. Friend the Member for Chigwell (Mr. Biggs-Davison) about the possibilities of a debate on Commonwealth trade and the G.A.T.T.? Is he aware that there is on the Order Paper a Motion on this matter, standing in my name and in the names of a large number of my right hon. and how Friends?

[That this House, mindful of the importance of maintaining and strengthening the economic links of the Commonwealth, particularly having regard to the position created by the breakdown of the Common Market negotiations, calls upon Her Majesty's Government to raise at the forthcoming General Agreement on Tariffs and Trade conference, and at the meeting of Commonwealth Trade Ministers prior thereto, the desirability of an amendment of the General Agreement on Tariffs and Trade, so as to remove obstacles to the expansion of Commonwealth trade and to the formulation of a policy that will assist home and Commonwealth agriculture without unnecessary cost to the Exchequer.]

Mr. Macleod: Only to the extent that immediately following the business question on which we are now embarked, my right hon. Friend the President of the Board of Trade will be making a statement on the G.A.T.T. negotiations and, as I said last week, we can consider future events in the light of that.

Mr. Grimond: Can the right hon. Gentleman tell us whether it is the Government's intention to amend the Customs regulations as they affect sugar? Is not the high price of sugar to a large extent due to the technical difficulty in the re-export preventing the Commonwealth Sugar Agreement working?

Mr. Macleod: As the right hon. Gentleman will recall, my right hon. Friend the Secretary of State for Scotland made some reference to this last night in his winding-up speech. I am not ready yet to go beyond that, but if necessary a statement will be made to the House.

Mr. Webster: Can my right hon. Friend say when we shall have a debate on the Rochdale Report?

Mr. Macleod: I hope reasonably soon after we have returned from the Recess.

Mr. Mendelson: Can the right hon. Gentleman give the House some information about the timing of the debate on the Ottawa Conference and the discussions on the reorganisation of N.A.T.O. nuclear weapons? Does he not think that a debate has now become very urgent in view of the confusion in which the Minister of State, Foreign Office, left the House and the country the other day when he answered Questions?

Mr. Macleod: Unquestionably, this is an urgent matter, but, clearly, there is no opportunity to discuss it before Whitsun. I gave an undertaking to the Leader of the Opposition last week, on business questions, that we would discuss the possibility of a debate which would embrace this matter, presumably fairly soon after we have returned.

Sir G. Nicholson: Would my right hon. Friend say whether, before the House is actually asked to debate a Statutory Instrument, it shall be informed whether or not it has been passed by the Select Committee on Statutory Instruments? I do not mean before it is put on the Order Paper, but before the House is asked to discuss it. Should not the Select Committee's Report be properly laid on the Table before such a discussion takes place?

Mr. Macleod: I should like to consider that point. I think that it has more repercussions than my hon. Friend


suggests. He is quite right that if any question were raised such an Order would not be taken until the point raised by the Select Committee had been disposed of. But it is common form to announce that, subject to no point being raised such an order will be taken. Perhaps my hon. Friend will be good enough to discuss with me the technical aspects of what he is suggesting.

Mr. A. Roberts: Has the attention of the right hon. Gentleman been drawn to a Motion in my name, and supported by many of my hon. Friends, on the supply of two-seater cars for disabled people?
[That this House, believing that similar disability whether arising from war service, industrial employment or other causes, should be assured of equal treatment, calls upon the Government forthwith to provide two-seater cars for paraplegics and other persons now qualifying for tricycles under the National Health Scheme.]
Is the right hon. Gentleman aware that if the Government are in any doubt on this matter we should be allowed some time to debate this very human problem?

Mr. Macleod: I have, of course, studied the Motion. This matter could have been raised in the recent discussions we had on a number of Ministry of Health Votes. As for the future, I take note of what the hon. Member has said.

Mr. Ronald Bell: Is my right hon. Friend aware of the general desire for a debate on Welsh affairs on Monday, 17th June?

Miss Herbison: The Leader of the House will be aware that yesterday the Law Reform (Succession, etc.) (Scotland) Bill was read the First time. As this is a long and complicated Bill, can the right hon. Gentleman give us any idea of a timetable for it? Do the Government expect, even with the best cooperation from us on this side of the House, to get the Bill through by the end of the Session?
Secondly, what help will we on this side of the House have on this complicated legal Bill, since we have no Law Officers to help us in the House?

Mr. Macleod: I am sorry that I was slow to catch up with the suggestion that

we should have a discussion on Welsh affairs on the first day when we return after the Recess. No doubt if that is a Supply day the Opposition will take note of it, and I do not suppose that there will be violent competition for that day.
On the point raised by the hon. Lady the Member for Lanarkshire, North (Miss Herbison), I agree that it is extremely late to introduce such an important Bill. When the hon. Lady uses the word "timetable", we are not using it in the traditional guillotine sense, but in the sense of whether it is possible for the Bill to go through both Houses before the first day or so of August. Frankly, that is unlikely. I have no wish to try to push it through, but I think that because this is such an important Bill it is right to bring it forward so that it can be seen and discussed. If it is possible to pass it into law this Session so much the better. If not, we would have to take it and complete its progress next Session.

Miss Herbison: Does not that prove that the mere presenting of the Bill is a piece of propaganda, the bringing forward of something which the Leader of the House knows can never be put on the Statute Book this Session?

Mr. Speaker: Regardless of anxieties of a nationalistic kind or otherwise, we must confine the time for business questions to business.

Mr. J. Griffiths: When the Leader of the House is considering what time will be devoted to Welsh affairs, will he ensure that he is not unduly influenced by the hon. Member for Buckinghamshire, South (Mr. R. Bell), who was the Member for a Welsh constituency for two months and was then contemptuously ejected?

Mr. H. Wilson: While the Leader of the House is thinking out an answer to that, will he, so that there is no suggestion of a precedent being created, correct the answer which he gave a few moments ago when he suggested that the Opposition might wish to use a Supply day for a debate on Welsh affairs? Does not he recollect that the day for Welsh affairs is a day allocated to Wales as of right and that it does not depend upon Supply days? Will he be very careful not to affront the feelings of hon. Members who feel very strongly on this subject?

Mr. Macleod: There is no answer to the point made by the right hon. Member for Llanelly (Mr. J. Griffiths). I concede the point straight away; it was a pleasant jest.
In answer to the Leader of the Opposition, I must ask him not to take everything quite so seriously.

Mr. Wade: Will the proposed Bill relating to reform of the House of Lords be introduced before the Whitsun Recess?

Mr. Macleod: Yes, Sir, I hope so. All the decisions on principle and policy have been taken, as I have announced to the House. The only difficulty is a purely technical drafting one. I hope that it will be possible to present the Bill before Whitsun.

Mr. Snow: Has the attention of the Leader of the House been drawn to the publication in yesterday's newspapers of a news item that the first lists of stations to be closed under the Beeching plan have now been communicated to the transport users consultative committees? Since this affects hon. Members, and since there is only six weeks' notice before an actual closure can take place, can the right hon. Gentleman help hon. Members in being informed of the details of the proposals?

Mr. Macleod: I can only help, I think, not in the context of next week's business but in my capacity as Leader of the House. I will see whether there is any way in which I can help hon. Members by discussing the point, if, indeed, it be true—I have no personal knowledge of it—with my right hon. Friend.

Mr. Marsh: Does the right hon. Gentleman recall the recent short debate, which ended in some confusion, about a constituency for Mr. Speaker? In view of the fact that my Bill was supported by hon. and right hon. Members on both sides, does the Leader of the House intend to give time for a debate on the subject, or does he think that it might be possible and logical to leave it over until next Session?

Mr. Macleod: No, Sir. This is a difficult problem on which, as the hon. Gentleman has good reason to know, contrary views are held. I have no state-

ment to make about time to discuss it or about whether it might be more appropriate, perhaps, for a Select Committee or a suitable body to consider it. It is a matter which I am studying.

Mr. Pavitt: On a rather narrower question affecting the railways, can the Leader of the House say whether the Minister of Transport will make a statement next week about the possible closure of the Broad Street-Richmond line? Is the right hon. Gentleman aware that, in spite of the opportunity which the Minister had to make a statement in the Adjournment debate last Friday, there have been Press reports that this line has been reprieved? Is it not consistent with the dignity of the House that such statements should be made here?

Mr. Macleod: Obviously, it would not be right to leap to assumptions before one has definite knowledge. I have had no indication of such a statement. I will inquire whether what the hon. Gentleman says is correct.

Mr. Popplewell: Further to the question asked by my hon. Friend the Member for Lichfield and Tamworth (Mr. Snow), will the Leader of the House consider introducing a short Measure to ensure that, before any branch lines are closed, Orders are introduced, under either the negative or the affirmative Resolution procedure, so that the House may discuss closures before they take place but after they have been considered by the transport users consultative committees?

Mr. Speaker: That is very wide of next week's business. It is a matter for legislation or policy.

Captain Orr: Can my right hon. Friend say when the ecclesiastical jurisdiction Measure is to come forward?

Mr. Macleod: No, Sir. As my hon. and gallant Friend knows, this is not Government business. Notice is given in the ordinary way. We should merely try, if we possibly could, to take it at a day and time convenient to the House. It will certainly be some time after Whitsun.

Mr. Hector Hughes: Will the Leader of the House reconsider his decision about the Law Reform (Succession, etc.) (Scotland) Bill, which is much wanted? It is a very good Bill. There is a great


demand for it, particularly in Scotland. Will he see that it is taken before the Recess?

Mr. Macleod: In some respects, what the hon. and learned Gentleman says is a little contradictory of what was said a few minutes ago by the hon. Lady the Member for Lanarkshire, North (Miss Herbison). I think that it is an advantage, particularly in a complicated legal matter, to have a Bill such as this produced and discussed. Of course, there are doubts about its future progress, but I have given my answer about that in response to the hon. Lady's question earlier.

Mr. Ronald Bell: At some time during next week's business, will my right hon. Friend find time to tell the right hon. Member for Llanelly (Mr. J. Griffiths) that Newport is in England?

Mr. Speaker: This is the time for business questions, not badinage.

G.A.T.T. (MINISTERIAL MEETING)

The President of the Board of Trade (Mr. F. J. Erroll): With permission, Mr. Speaker, I would like to give the House an account of the meeting of Ministers of the Contracting Parties to the G.A.T.T. which has just ended in Geneva. The purpose of this meeting was to consider measures for increasing world trade under three distinct but related heads:

1. the trade of less-developed countries;
2. trade in agricultural products; and
3. the reduction of tariffs and other barriers to trade.

We had the advantage of useful preliminary talks with the Commonwealth.
Under the first head, the meeting adopted, though with reserves on the part of the E.E.C. and their Associates, a programme of action for expanding the trade of less-developed countries. It approved the establishment of an Action Committee to secure early progress and to consider further measures to promote the trade of these countries. Meanwhile, as an earnest of our intentions, we and the E.E.C. are working on the details of

arrangements for suspending our tariffs on tea and tropical hardwoods.
Under the second head—agriculture—it was agreed to reconvene the Special Groups on cereals and meat to negotiate arrangements for these commodities, and to set up a similar group on dairy products. Rules and methods for dealing with agriculture in the negotiations have still to be worked out.
Under the third head, we reached agreement on a statement of principles to govern the trade and tariff negotiations which are to begin in May, 1964. These will embrace tariff and non-tariff barriers to trade both in manufactures and in agricultural and primary products. A committee will work out a plan for the negotiations and supervise their conduct. It is to produce its plan by 1st August of this year.
As regards tariffs, the object will be to make a substantial cut across the board with a minimum of exceptions. As a general rule the cuts will be of equal depth, though in special cases where differences in the levels of national tariffs have significant effects on trade, special rules are to be devised. The Government's intention will be to obtain equivalent advantages for our exports in return for reductions in our own tariff. We shall not, however, expect to receive reciprocity from less-developed countries.
These arrangements, which were not agreed without difficulty, will allow the preparations for the trade negotiations to proceed with the prospect of a substantial reduction in barriers to trade of all kinds. Much detailed work remains to be done, but a good start has been made. Her Majesty's Government will continue to do their utmost to ensure a successful outcome of this great and imaginative undertaking which holds so much promise for the increased prosperity alike of the industrial nations, the agricultural producers and the developing countries.

Mr. Callaghan: First, when the President of the Board of Trade refers to suspending our tariffs on tea, to what duties is he referring?
Secondly, with regard to the Action Committee, do I take it from what he said that the next few months will be taken up in preparing a plan to decide


how we shall start the negotiations that we hope will begin at some time after 1st August?
Thirdly, has the right hon. Gentleman any idea yet when we can expect to see some practical results? What timetable is likely to be set?
Fourthly, what has the right hon. Gentleman in mind for increasing the purchasing power of the under-developed countries, either through commodity agreements or in some other way, so that the flow of trade will not dry up?
Finally, while we are all glad that the right hon. Gentleman has got over the initial hurdle and that the negotiations have not broken up before they have started, as seemed likely at one stage, and while we want international solutions to the problem, may I ask the Government, through him, not to get into the position in relation to these negotiations that we got into in the earlier Brussels negotiations—having a breakdown without alternative plans being ready?
Would he not think it worth while having a study group to examine the effects of the G.A.T.T. on the position of the Commonwealth and the underdeveloped countries in particular and starting studies now so that in the event of a calamitous failure of the negotiations we can be ready to embark on other courses of action which will be appropriate to our position?

Mr. Erroll: I will try to answer the points raised by the hon. Gentleman in the order in which he put them.
The tariff on tea is the tariff we impose on non-Commonwealth supplies in order to provide Commonwealth suppliers with a preference.
The Action Committee is that in respect of the action programme which was put forward by the less-developed countries and which was generally approved by the G.A.T.T. This programme is being referred to its own Action Committee. The other committee to which I referred, which will be drawing up its plan by 1st August, is dealing with the rules for the negotiations on tariffs as distinct from the items in the action programme. There are two separate committees.
It is impossible at this stage to say when we shall see practical results,

because not only is it an immensely involved and intricate subject but we have still to agree the rules under which the negotiations shall proceed. But we are hopeful that, if the rules are agreed, the full tariff negotiation will be able to begin on 1st May next year, which is the earliest date on which the Americans can take part. Thereafter, progress can be measured only as we go along.
With regard to the Brussels negotiations and their breakdown, we are not in the same position here, of course. We are one of the Contracting Parties to the G.A.T.T., and I do not think that we need consider, at any rate at this stage, what would be the likelihood of a breakdown in the negotiations, which are of a long-term nature and also cover a number of different fields. It would be very unlikely that there would be a general breakdown. But where the matter concerns particularly the Commonwealth countries, we are, of course, in very close touch with Commonwealth Trade Ministers, following upon the successful two-day meeting of such Ministers in London. Some of the under-developed countries not in the Commonwealth told me afterwards that they appreciated the lead which Britain had given at the G.A.T.T.

Mr. Turton: Under the second heading of the marketing of agricultural produce, can my right hon. Friend say whether our policy in this respect met with the complete approval of Canada, Australia and New Zealand, and, if that was the case, can he tell us whether there will now be close Commonwealth consultation so that we can get an agreed plan from the Commonwealth before the next stage in the proceedings?

Mr. Erroll: Agriculture was, of course, discussed at the meeting of Commonwealth Trade Ministers in London, over which I presided, and I think that the general view was that our proposals were sound, although they did not commit themselves fully because at that stage we ourselves were not able to put forward our own proposals in sufficient detail. Our proposals were well received in the G.A.T.T. generally and resulted in the special groups, which I mentioned in my statement, being set up forthwith to go into the details of the negotiations. We shall, of course, keep in the closest touch


with the three Commonwealth countries which my right hon. Friend mentioned.

Mr. Grimond: May I ask the President of the Board of Trade two questions? First, can he say something about the significance to the producer countries of the arrangements for suspending tariffs on tea and tropical hardwoods? Is it not the case that many countries impose an internal duty on tea? Have they agreed to reduce or suspend it? Also, what is the significance of the suspension of the tariff on hardwood?
Secondly, does the fact that the special groups are empowered to negotiate arrangements in respect of meat and cereals mean that they are empowered to conclude commodity agreements, or have we not got as far as that?

Mr. Erroll: Where there is a tariff in respect of tea or hardwood, its elimination will, of course, be a help. Revenue duties are a separate item in the action programme, on which certain countries which have high revenue duties made certain reservations.
It is too early to say how far the special groups can go. They would have no power to impose any international agreements, because all these matters are done by the consent of the Contracting Parties. But we certainly hope to use the two special groups as far as we can in the evolution of the agricultural policy announced by my right hon. Friend the Minister of Agriculture yesterday afternoon.

Mr. Russell: Will my right hon. Friend explain how the elimination of the tariff on tea by this country will help India and Ceylon? Did he have any consultation with the Governments of those two countries before agreeing to it?

Mr. Erroll: I am glad to tell my hon. Friend that I had consultations with the two countries. The advantage to India and Ceylon is that it gives them improved access into the markets of third countries, more than they could hope to get by the natural increase in tea drinking in this country. Therefore, it is of net benefit to them.

Mr. Warbey: Would the right hon. Gentleman agree that the essential outcome of the conference is that the actual playing of the Kennedy Round is

deferred until the end of the decade and that when it is played it will probably be only a nine-hole one?

Mr. Erroll: No, Sir. I think that the Kennedy Round has a good chance of making progress. If the hon. Gentleman had studied the subject more carefully, he would have seen that it will not be a nine-hole one and will not take until the end of the decade.

Mr. Hirst: In congratulating my right hon. Friend upon the more hopeful trends secured at Geneva than at one time we thought possible, may I ask him to bear in mind the point of view of British industry about the possible dangers in cuts across the board applied percentage-wise in the light of the fact that in countries which have very high tariffs—100 per cent., and so on—the 50 per cent. cut may still leave a very high degree of protection and that in countries of low tariffs, such as in ours, the 50 per cent, cut will be of real significance.

Mr. Erroll: The Contracting Parties agreed that the essential thing to go for was an across-the-board cut whereby those tariffs which were highest would come down by the greatest amount. This was one of the points which took up a great deal of time of the Ministers concerned. It was recognised that there were certain cases where there were substantial tariff disparities between contracting parties and that where these could have a significant effect on trade they could be made the subject of special treatment. This is one of the matters which the trade negotiating committee will examine with a view to working out rules to keep to a strictly limited number of exceptions.

Mr. Snow: While one must not be pessimistic in any sense of the word, does the right hon. Gentleman accept that the general proposals themselves do not guarantee an increase in exports for this country? Has he taken the opportunity of discussing the growing apprehension about the unavailability of international credit, sometimes referred to as liquidity?

Mr. Erroll: International liquidity was not discussed in plenary session. I fully agree with the hon. Gentleman that this


meeting will not of itself increase trade. It will be a long haul. But we have taken a necessary first step.

Mr. Leavey: With regard to the across-the-board proposal and the principle which has been apparently accepted, my right hon. Friend stated that Her Majesty's Government and others will not press for reciprocity from the less-developed countries. I do not expect my right hon. Friend to go into detail, but can he give some general indication of what the Government have in mind about the position of the cotton textile industry, having regard to the fact that 40 per cent. of our home market is already taken by imports, a substantial proportion of which come from the less-developed countries from whom reciprocity is not to be requested?

Mr. Erroll: I am grateful to my hon. Friend for not expecting me to reply in detail to the very important point that he has raised. However, a large proportion of the imported textiles from the less-developed countries come from the Commonwealth countries and such imports are already free of any tariff. There is, therefore, no question of giving them a cut in tariff because none exists.

Several Hon. Members: rose—

Mr. Speaker: Order. We must exercise sufficient self-restraint to enable us to get to the Orders of the Day, which the Clerk will now read.

Orders of the Day — FINANCE BILL

Considered in Committee [Progress 21st May].

[Sir WILLIAM ANSTRUTHER-GRAY the Chair]

Clause 42.—(CO-OPERATIVE HOUSING ASSOCIATIONS.)

Question proposed, That the Clause stand part of the Bill.

4.3 p.m.

Mr. G. R. Mitchison: May we be told by the Government the object of the Clause? I think that I can see it.

The Joint Parliamentary Secretary to the Ministry of Housing and Local Government (Mr. F. V. Corfield): The Clause provides relief from tax for cooperative housing associations approved under the Clause by the Minister of Housing and Local Government, the Secretary of State for Scotland or the Minister of Health and Local Government for Northern Ireland, as the case may be. It provides, in effect, that associations are to be treated as collective owner-occupiers—that is, they will not be liable to tax on rents which they receive from their members, and interest paid by the association is to be treated as paid by the members in shares proportionate to their rents.
The relief, therefore, is twofold. In the first place, the association will not be charged with Income Tax or Profits Tax on the rents which it receives from its members. In the second place, each member will be allowed relief where appropriate on as much of the interest paid by the association as is attributable to the property which he occupies. The association, of course, remains liable to tax in the ordinary way on income from invested funds and will be treated as itself paying any interest attributable to unlet properties. The basis of the scheme is complete mutuality between membership and tenancy.

Mr. Mitchison: I am obliged to the hon. Gentleman for that explanation. This seems to remedy a foolish part of the law, and in that spirit we are glad


to accept it, noting that there is a hypothetical rent in the middle of it.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Schedule 8 agreed to.

Clause 43.—(OVERSEAS TRADE CORPORATIONS: HOLDING COMPANIES.)

Sir John Barlow: I beg to move, in page 46, line 44, at the end to add:
(2) Section 23(1) of the Finance Act 1957 shall also apply so that the same results shall follow in respect of a subsidiary company not resident in the United Kingdom but trading wholly outside the United Kingdom, as would now follow if the trade of that company was carried on by a company resident in the United Kingdom, and section 35 of the said Act shall apply in respect of dividends from a subsidiary company as defined above as it now does to the overseas trading income; and the provisions of Schedules 5 and 6 shall apply accordingly.
It will be remembered that the idea of the overseas trade corporations was started about six years ago. At that time it was obvious that this was entirely new legislation for the Treasury, and, plainly, it had to be very careful to see how it would work. For that reason, it was rather circumscribed, and it must be regarded as a pilot scheme. It was for companies registered in the United Kingdom with branches abroad, and it did not cover non-resident subsidiaries which were abroad or in this country.
The result was that the overseas trade corporation experiment as intended by the Royal Commission on Taxation, namely, that it should apply to all businesses outside the United Kingdom, was not achieved. In view of the experience of the last six years, I suggest that the time has arrived when this extension could be made.
The Treasury has great experience of these companies—I believe that they number 836—and, obviously, it can see fairly easily how any further extension would work. If this extension were allowed, it would help very much our balance of payments, and it would help the transfer of funds from one part of the Commonwealth to another, which is not provided for at present.
If my right hon. Friend the Chancellor of the Exchequer has any criticism of this suggestion, it may be that there is a

risk of tax avoidance. Since the cost of the overseas trade corporation companies has been much lower than was originally estimated, and in view of the great knowledge and experience about these companies which the Treasury has gained, I believe that there is very little risk of that.
As I have said, it is probable that this Amendment will help the flow of funds from one Commonwealth country to another and will also encourage non-sterling companies to register in this country and carry on business, which will be of great benefit to this country and to the Commonwealth countries involved.

Mr. Stanley R. McMaster: I support the Amendment, which has been so admirably moved by my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow). I do not wish to repeat the argument which he has clearly and lucidly adduced, but I should like to add one point.
The fear of any loss through tax avoidance as a result of accepting the Amendment should be counterbalanced by the fact that many overseas trade corporations face competition from similar companies which are resident in other European countries, where they have a greater advantage than British overseas trade corporations.
To accept the Amendment would help to put them on an equal footing with such companies which are registered, particularly, in France, Germany and Italy. It would be of considerable advantage to them if their foreign subsidiaries could transfer their profits from one overseas country to another and would help to build up British interests abroad, which must be to the long-term benefit of this country.

The Financial Secretary to the Treasury (Mr. Anthony Barber): It is not easy for those who have not followed our debates in previous years to appreciate the significance of this Amendment. I think that my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow), who introduced it, has set out clearly what he has in mind. I should like to assure him that, although the Amendment appeared on the Notice Paper only a couple of days ago, this was one of the aspects of the overseas trade corporation scheme which my right hon.
Friend considered before reaching his conclusions about the Budget.
As my hon. Friend will realise, the principal object of the overseas trade corporation scheme was to meet the complaint that the high rates of United Kingdom tax made it difficult for United Kingdom resident companies trading overseas to compete with local companies or with companies resident in third countries which paid tax at a lower rate or got some form of special tax relief.
While the scheme was designed mainly to give relief to trading companies, it also gives certain relief to holding companies. A United Kingdom company which does not itself carry on any trade, but which is the parent of one or more trading overseas trade corporations, can, subject to certain conditions, itself qualify as an overseas trade corporation, and, if it does, it is exempt from Income Tax and Profits Tax on any dividend from a subsidiary overseas trade corporation and can, without becoming liable, use such a dividend to finance, by grant or by loan, another subsidiary overseas trade corporation.
This covers the point in the case of resident companies switching between one subsidiary company and another through the medium of the parent company, which, I understand, from the two speeches to which we have listened, it is desired to extend to the case of those subsidiary companies which are not resident in the United Kingdom.
There are a number of points that I could make about the Amendment, but I do not think that my hon. Friend would wish me to go into details about drafting, and I need not remind the Committee of the object, because it has been so clearly and briefly put by my hon. Friend.
My hon. Friend may or may not know that we have had discussions with industry about proposals similar to that which is embodied in the Amendment. We asked the representatives of industry who met us to discuss these proposals, whether they could furnish us with any actual example of cases where desirable development in an overseas territory had been held up because of the absence of what might be called the overseas trade corporation switching facilities to which I have referred. They were not able to provide us with any such examples,

although it does not necessarily follow that there is none.
They referred to cases in which money was left in the country of origin when it might have been more usefully employed elsewhere. But that is not quite the same thing. I am not saying for one moment that there are not considerable arguments in favour of what my hon. Friend has put forward, and he will recall that we have discussed much the same point in previous years.
A further matter to which I should draw the attention of the Committee is that the tax at issue in the case envisaged by my hon. Friend is not the full extent of the United Kingdom taxation on dividends received by United Kingdom companies, because in the ordinary way these funds will have borne tax in the country in which they have been earned, and double taxation relief would be available to the parent company. In many cases the tax at issue may not be more than a small percentage of the funds being transferred.
4.15 p.m.
Before this Amendment appeared on the Notice Paper, we considered the whole of the overseas trade corporation scheme, including this aspect. I must regretfully tell my hon. Friend that, in our view, the arguments against these proposals have lost none of their weight. In the first place, the whole object of the overseas trade corporation scheme is to benefit a resident company. The retention by companies operating overseas of their United Kingdom residence benefits this country in a number of ways which are quite unconnected with taxation. I can give my hon. Friend examples if he wishes, but I hope that it will suffice to say that it was one of the merits claimed for the scheme that it would help to prevent the migration of United Kingdom companies to other countries.
Secondly, I should like to remind the Committee that the non-resident company of which my hon. Friend is speaking is not by the overseas trade corporation scheme made any worse off than it was before and still has certain tax advantages as compared with the overseas trade corporation. For example, it is not liable to Profits Tax on its investment income whether arising in this country or overseas. It is not liable to Income Tax on overseas investment income or on income from War Loan and


certain other British Government securities.
The overseas trade corporation, on the other hand, is liable to Income Tax and Profits Tax on the whole of its investment income. Moreover, distributions made by non-resident companies on liquidation constitute capital receipts in the hands of shareholders and are not liable to United Kingdom tax. Distributions on liquidation by overseas trade corporations, on the other hand, so far as they come out of exempt trading profits and do not represent the repayment of the original capital, are chargeable to Income Tax in the hands of the liquidator.
My hon. Friend referred to the fact that the admission of non-resident subsidiaries might involve some risk of tax avoidance. It is true to say that for any scheme offering adequate safeguards, which would be necessary if we were to do as my hon. Friend suggests, the legislation would be very complicated indeed. I was reminded before I came into the Chamber that my right hon. Friend the Chancellor of the Exchequer, when he was Paymaster-General, in 1959, spoke about the point which my hon. Friend has raised again this afternoon and dealt at some length with the difficulty of preventing avoidance.
I think, from what little I know of the details of the subject matter, that my hon. Friend has probably got a point in saying that, from the experience which we have gained over the years, it would be easier now to deal with the anti-avoidance provisions than when the scheme was introduced. I hope from what I have said that the Committee will appreciate that that is not the only point on which we feel considerable doubt in connection with this proposal.
I assure my hon. Friend that his suggestion, which would, of course, involve a basic change in the overseas trade corporation scheme, was carefully considered before my right hon. Friend framed his Budget proposals and we have looked at it again since his Amendment appeared on the Notice Paper. But I fear that I cannot advise the Committee to accept the principle which my hon. Friend seeks, and I hope that on that account he will not press his Amendment. If that were not enough, I would remind my hon. Friend, without

troubling him with the details, that I hope he will accept it from me that his Amendment is not in any event adequate to deal with the avoidance problem which my hon. Friend frankly admitted would have to be dealt with and which is inherent in the proposal about which he has spoken.

Sir J. Barlow: In view of my hon. Friend's explanation—which is not entirely satisfactory, but I appreciate some of the difficulties—I beg to ask leave to withdraw the Amendment.

Amendment, by leave, withdrawn.

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: I am sorry, but I must ask the Government again to be so good as to explain, first, why the original proviso was put into Section 23 of the Finance Act, 1957, and secondly, what change of circumstances has now caused the Government to recommend its removal. Will they, at the same time, indicate the financial effect of the proposed removal?

Mr. Barber: As the /ion. and learned Member will appreciate, the Clause is of limited application. I explained its purpose on Second Reading. Suffice it to say that the object is to abolish a rule which is set out in Section 23 of the 1957 Act and which, in effect, denies the status of an overseas trade corporation to certain holding companies.
The Clause is the substance of a provision to meet a point which has been made by my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens). Under the 1957 Act, a United Kingdom company can, in certain circumstances, with which we are all familiar, qualify as an overseas trade corporation. If it qualifies, it is freed from Profits Tax on the profits of its trade and it is not required to pay Income Tax on them either as long as they are withheld from distribution.
A company with a trade of its own can enjoy overseas trade corporation status even when it possesses one or more subsidiaries in the United Kingdom which are not themselves overseas trade corporations. To prevent such a parent company from using the trading profits, which are exempted in its hand while undistributed, for the purpose of financing


either through loans or grants the operations of a subsidiary carrying on a trade within the United Kingdom, the 1957 Act contains a safeguarding provision which imposes liability on an overseas trade corporation in respect of exempt trading income advanced by way of loans or grant to any associated company which is not itself an overseas trade corporation.
A company which has no trade of its own can also secure recognition as an overseas corporation if it has one or more subsidiaries which are trading as overseas trade corporations. The proviso to Section 23(1) of the 1957 Act, to which the hon. and learned Member for Kettering (Mr. Mitchison) has referred, disqualifies a holding company if it possesses any subsidiary which is resident in the United Kingdom but which is not itself an overseas trade corporation.
The hon. and learned Gentleman asked why the proviso was originally inserted in the 1957 Act. It was inserted as a long-stop to prevent avoidance of taxation. If the provisions which impose tax on the making of a loan or grant to an associated company, to which I referred a few moments ago, are adequate, there is no need for the long-stop. When the overseas trade corporation scheme was first devised, those at the Treasury at that time thought that it would be sensible to err on the side of safety and did not feel that we could safely dispense with the proviso, to which exception has been taken on a number of occasions since.

Mr. Mitchison: By whom was exception taken?

Mr. Barber: By those in industry. I was coming on to explain that there may well be circumstances which force an overseas trade corporation to cease trading, with the result that its own loss of status would bring disqualification upon the parent as a result of the operation of the proviso.
The danger can best be illustrated if one considers a trading subsidiary which, under threat of, say, expropriation in an overseas territory, has no prudent course open to it but to dispose of its trade to local interests. If the subsidiary ceased to trade, it would thereby bring disqualification on the parent com-

pany, which would become liable to tax forthwith on the entire undistributed balance of the exempt trading income, including dividends, from all its overseas trade corporation subsidiaries which it had enjoyed since it first qualified as an overseas trade corporation. It will be apparent to everybody that whatever might be the rights and wrongs of dispensing with the proviso, this would have serious financial consequences for the parent company concerned.
Originally, we thought it necessary to include the proviso because we felt that unless we did so, there would be dangers of unscrupulous people seeking to avoid tax. Since then, we have had more experience of the working of the scheme and we have reached the conclusion that the existing provision—[Interruption.] I do not know why the hon. Member for Cardiff, South-East (Mr. Callaghan) shakes his head. He was away all last week. He comes back and immediately says, "No, no, no."
We have considered this matter carefully. My right hon. Friend would certainly not have dispensed with the proviso unless he was satisfied that the existing provisions and the way the scheme had worked out were adequate. We have reached the conclusion that the existing provisions without automatic disqualification in such a case are adequate.
I hope that for the reasons I have given the Committee will agree that the Clause is reasonable and will go quite a long way to prevent companies which otherwise might in all innocence be faced with serious financial penalties from being put in that position.

Mr. Mitchison: Will the hon. Gentleman answer my question about the financial effect?

Mr. Barber: I am advised that the result is not so much to sacrifice revenue, but to relieve those engaged in overseas business from the necessity of so arranging their affairs as to avoid falling into a particular taxation pitfall. Consequently, there will be no significant effect upon the Exchequer.

Mr. Mitchison: As we remember, this proviso was put in as a safeguarding provision against tax avoidance. When the original proposals contained in the


1957 Finance Act were before the Committee, we from this side pointed out again and again that those proposals were full of opportunities, so it seemed to us, for tax avoidance. In this case, to the best of my recollection—and I have referred to the debates at the time—the Treasury included this long-stop on their own without being obliged to do it. It was a long-stop of general application. It was what should and what should not be a very privileged body, an overseas trade corporation.
The balls, or some of them, have, no doubt, been stopped, but the Treasury is in no position to tell us which were stopped by the long-stop and which by the wicket-keeper. Therefore, we have no indication of how effective the wicketkeeper has been or whether it is wise to remove the long-stop.
I do not want to go into the matter in great detail, but, when we are given the instance which the Financial Secretary has put before us, I do not see the great hardship that is indicated. The companies concerned have had the benefit of an exceptional concession that was given to them under certain conditions in the Act. We were told, rightly, that they could have made provisions which would have saved them any trouble in the event indicated. All that the Government's proposal does is to prevent them from taking the trouble to make the necessary provisions.
We are told that there will not be any revenue effect. That depends, however, upon who stops the bowling—and it remains to be seen. There are so many —I do not know whether to call them balls or wides; I would almost have said side slips, but I do not think those are bowled. So many funny things are going on in connection with overseas trade corporations that not only were we justified in our objections at the time, but they arose out of the recommendations of the Royal Commission.
4.30 p.m.
Those recommendations were very cautious and limited. They were dissented to by a minority of the Royal Commission at the time. They did not deal with the question of subsidiaries, which is far the most difficult part of all this. I should have thought that, if the Treasury felt that there was some reason

for making special provision for the particular circumstances the hon. Gentleman has indicated, it was not a case of removing the long-stop, but of making some other and more appropriate provision for what is required.
If the hon. Gentleman expects us to support this Clause when the object is to remove a tax avoidance provision, to widen the scope of an arrangement we have always regarded with a great deal of criticism, we shall have to disappoint him on this occasion.

Mr. Barber: I am sure that, in fairness, the hon. and learned Gentleman will agree that, if the other provisions in the scheme to which I referred earlier are adequate to deal with the matter—in other words, those provisions which impose tax on the making of a loan or grant to an associated company—he will be the first person to say that we need not have the proviso which it is now sought to remove from the 1957 Act.
If it turns out, contrary to our expectations, that the proviso is needed after all, I am sure that I can give an assurance to the Committee, on behalf of my right hon. Friend, that we will deal with the matter. Of course, in view of what the hon. and learned Gentleman has said, we will keep the matter under review, but we would not have taken this step unless we really thought it a fair thing to do and that we had sufficient safeguards in the original legislation.

Mr. Mitchison: We are anxious to save time on this matter. All we wish to say is that we prefer the Treasury when it is trying to safeguard against evasions, as it was in 1957, to the Treasury of 1963, which, apparently, is trying to save taxpayers a certain amount of trouble in arranging their affairs.

Sir J. Barlow: I welcome this Clause and regard it as a long-lost friend—so long-lost that it has almost been forgotten. In June, 1957, the then Economic Secretary, turning down this proposal, said that it
…raises extremely complex…points… my right hon. Friend… is studying this matter with full sympathy…we are giving this very complex and difficult problem sympathetic consideration."—[OFFICIAL REPORT, 26th June, 1957; Vol. 572, c, 308.]
It has been hidden in the archives for six years, so it is all the more welcome


now. I hope that the principle of the Amendment which I have just failed to get adopted, will not be lost sight of for the next six years.

Mr. Geoffrey Stevens: I am grateful to my right hon. Friend the Chancellor for accepting the proposals on this very valuable point which my hon. Friend the Member for Middleton and Prestwich (Sir J. Barlow) and I have been hammering away at all this time. I believe that the removal of this long-stop will enable British trade to do more business overseas, and that will be a good thing for all of us. I am glad that he has done it this time.
But one point puzzles me. If it is right in May, 1963, that this potential cause of disqualification should be removed, would it not have been equally right, after all, in 1957? The Clause as drawn has no retrospective effect. If it is right today, surely the Clause should be redrafted to have effect back to 1957.

Mr. Barber: I think that there would be grave objections to doing as my hon. Friend the Member for Portsmouth, Langstone (Mr. Stevens) suggests. It would certainly lead to very serious practical difficulties. The treatment for both Income Tax and Profits Tax purposes of a holding company qualifying as an overseas trade corporation is quite different from that of a non-overseas trade corporation holding company. If we were to do as my hon. Friend suggests, it would be necessary to revise the whole of these companies' liabilities in the past six years.
I do not want to get too far into this, but the matter does not even rest there. The holding companies in question may well have made distribution of profits by way of dividends during these six years on the basis that they were not overseas trade corporations, and the recipients of those distributions will quite properly have been assessed to tax on the assumption that that basis was correct. If we were now to make this Clause retrospective, obviously different tax consequences for those who have received dividends would ensue. There would be grave practical difficulties, apart from the question of principle, involved in doing as my hon. Friend suggests.

Mr. James Callaghan: This is not good enough. The whole question of overseas trade corporations, after six years' experience, needs reviewing in detail to see how far this system is profitable to Britain. Profitability was its justification originally. We need much more information. As far as I can see, these things are all available even when money is remitted back to this country. I believe that a great deal of this money will not qualify and return to this country. For this reason, I am very much against any extension of this nature.
I believe that the hon. Member for Portsmouth, Langstone (Mr. Stevens) is leaving the House at the next election. We shall be very sorry to see him go. He has always brought a great deal of dignified learning and knowledge to our discussions on taxation. But perhaps it is because he is leaving us, and is considering this purely from the point of view of what he believes to be right in the circumstances, that he does not understand why it is being done in 1963 but could not be done in 1957, according to the Government. The simple explanation is that there is an election coming. Whether it be expansion of corporations or remission of Stamp Duty-—

The Chairman: Order. I hope that the hon. Gentleman will not go further. We are discussing whether Clause 43 should stand part of the Bill.

Mr. Callaghan: I am discussing the reasons for introducing this provision, Sir William. The question was asked why it was introduced, and I was giving the answer.
It was introduced to sweeten the City and get a few more subscriptions to Tory Party funds. It makes nice women of a number of companies who have been arranging their affairs not illegally, but not with that degree of purity we would like to see. We all know that. This provision is designed to further Tory Party funds, and as we have no wish to assist them to get more money, we will divide against this Clause.

Mr. McMaster: I rise to say how much I disagree with the remarks made by the hon. Member for Cardiff, South-East (Mr. Callaghan). There are many ways in which this country can be


benefited by this provision in addition to the direct remission of money from trading subsidiaries abroad. Not only can their profits be used by other businesses abroad ordering goods from Britain, but, also, British interests are extended and, therefore, when such companies, and others, a re buying capital equipment the money is much better spent here than in some of our foreign competitors. That is just one reason why I support this extension of the rule, which was introduced six years ago.
I return to the point I made earlier. Many of our trading competitors are much more generous with their overseas trading corporations than this country has been heretofore. I support this extension and I should like the Government to reconsider the original Amendment in the hope that, as with the Amendment introduced by my hon. Friends six years ago, in time it will he accepted by the Government, because it is to the benefit of this country to build up its overseas trading interests.

Mr. J. T. Price: I am not so much concerned with the academic arguments advanced in favour of the proposed change as with the practical effect. I remind the Committee that in the debates on the 1957 Finance Act I had a considerable argument with the then Financial Secretary to the Treasury, now the right hon. Gentleman the Minister of Health, who, in reply to my observations about relief given to overseas trade corporations, said that it would

make a valuable contribution to the balance of payments and replenish some of the losses otherwise suffered by adverse conditions of trade.

In fact, exactly the opposite has occurred. During that argument, I asked one or two questions which were germane to the issue and are even more germane now. What purpose is served in the country's economic performance if capital invested in overseas trade corporations does not provide work for British workers, or return to the parent company in Britain the profits earned, if any, by those operations overseas?

These are weighty considerations. Last year, to check what had happened, I put some Questions to Treasury Ministers—I will not weary the Committee with the references—to elicit what losses had been suffered by the Treasury as a result of the loss of the overseas trade corporation Clause. I was told that in 1961 it was £16 million and about £11 million in 1960 and figures of that order for other years. That does not support the proposal to extend these powers and I think that my right hon. and hon. Friends are right to insist that this is a matter of principle upon which the Government have not made their case and that we should register our protest in the Division Lobby.

Question put, That the Clause stand part of the Bill: —

The Committee divided: Ayes 193, Noes 128.

Division No.121.]
AYES
[4.43 p.m.


Allason, James
Butler, Rt. Hn. R.A. (Saffron Walden)
Finlay, Graeme


Arbuthnot, John
Carr, Robert (Mitcham)
Fletcher-Cooke, Charles


Atkins, Humphrey
Chichester-Clark, R.
Fraser, Rt, Kn. Hugh(Stafford &amp;Stone)


Awdry, Daniel (Chippenharm)
Clark, Henry (Antrim, N.)
Fraser, Ian (Plymouth, Sutton)


Balniel, Lord
Clark, William (Nottingham, S.)
Galbraith, Hon. T. G. D.


Barber, Anthony
Cleaver, Leonard
Gammons, Lady


Barlow, Sir John
Cooper-Key, Sir Neill
Gardner, Edward


Barter, John
Cordeaux, Lt.-Col. J. K.
Glyn, Sir Richard (Dorset, N.)


Batsford, Brian
Corfield, F. V.
Goodhew, Victor


Beamish, Col. Sir Tufton
Coulson, Michael
Grant-Ferris, R.


Bell, Ronald
Courtney, Cdr. Anthony
Grimond, Rt. Hon. J.


Bennett, Dr. Reginald (Cos &amp; Fhm)
Craddock, Sir Beresford (Spelthorne)
Grosvenor, Lt.-Col. R. G.


Berkeley, Humphry
Critchley, Julian
Gurden, Harold


Biffen, John
Crosthwaite-Eyre, Col. Sir Oliver
Hail, John (Wycombe)


Biggs-Davison, John
Curran, Charles
Hamilton, Michael (Wellingborough)


Bingham, R. M.
d'Avigdor-Goldsmid, Sir Henry
Harrison, Brian (Maldon)


Bishop, F. P.
Digby, Simon Wingfield
Harrison, Col. Sir Harwood (Eye)


Black, Sir Cyril
Donaldson, Cmdr. C. E. M.
Harvey, Sir Arthur Vere (Maccleef'd)


Bossom, Hon. Clive
Drayson, G. B.
Heald, Rt. Hon. Sir Lionel


Bowen, Roderic (Cardigan)
du Cann, Edward
Henderson, John (Cathcart)


Boyd-Carpenter, Rt. Hon. John
Duncan, Sir William
Hiley, Joseph


Boyle, Rt. Hon. Sir Edward
Eiliot, Capt. Walter (Carshalton)
Hill, Dr. Rt. Hon. Charles (Luton)


Brown, Alan (Tottenham)
Emmet, Hon. Mrs. Evelyn
Hill, Mrs. Eveline (Wythenshawe)


Bullard, Denys
Errington Sir Eric
Hill, J. E. B. (S. Norfolk)


Bullus, Wing Commander Eric
Farey-Jones, F. W.
Hirst, Geoffrey


Burden, F. A.
Fell, Anthony
Holland, Philip




Hopkins, Alan
Marshall, Douglas
Smith, Dudley (Br'tnf'd &amp; Chiswick)


Hornby, R. P.
Marten, Neil
Smithers, Peter


Hornsby-Smith, Rt. Hon. Dame P.
Matthews, Gordon (Meriden)
Smyth, Rt. Hon. Brig. Sir John


Howard, Hon. G. R. (St. Ives)
Mawby, Ray
Spearman, Sir Alexander


Howard, John (Southampton, Test)
Maxwell-Hyslop, R. J.
Stevens, Geoffrey


Hughes Hallett, Vice-Admiral John
Maydon, Lt.-Cmdr. S. L. C.
Steward, Harold (Stockport, S.)


Hughes-Young, Michael
Mills, Stratton
Studholme, Sir Henry


Hurd, Sir Anthony
Morgan, William
Talbot, John E.


Hutchison, Michael Clark
Morrison, John
Tapsell, Peter


James, David
Nabarro, Sir Gerald
Taylor, Frank (M'ch'st'r, Moss Side)


Jenkins, Robert (Dulwich)
Nicholson, Sir Godfrey
Teeling, Sir William


Johnson, Dr. Donald (Carlisle)
Nugent, Rt. Hon. Sir Richard
Temple, John M.


Johnson Smith, Geoffrey
Orr, Capt. L. P. S.
Thatcher, Mrs. Margaret


Jones, Rt. Hn. Aubrey (Hall Green)
Page, Graham (Crosby)
Thompson, Sir Kenneth (Walton)


Kaberry, Sir Donald
Page, John (Harrow, West)
Thompson, Sir Richard (Croydon, S.)


Kerr, Sir Hamilton
Pannell, Norman (Kirkdale)
Thorpe, Jeremy


Kershaw, Anthony
Pearson, Frank (Clitheroe)
Touche, Rt. Hon. Sir Gordon


Kirk, Peter
Peel, John
Turner, Colin


Kitson, Timothy
Pickthorn, Sir Kenneth
Turton, Rt. Hon. R. H.


Lagden, Godfrey
Pitman, Sir James
Tweedsmuir,Lady


Lancaster, Col. C. G.
Pitt, Dame Edith
Vaughan-Morgan, Rt. Hon. Sir, John


Leavey, J. A,
Pott, Percivall



Leburn, Gilmour
Price, David (Eastleigh)
Vickers, Miss Joan


Legge-Bourke, Sir Harry
Prior, J. M. L.
Wade, Donald


Linstead, Sir Hugh
Prior-Palmer, Brig. Sir Otho
Wakefield, Sir Wavell


Longbottom, Charles
Proudfoot, Wilfred
Walder, David


Loveys, Walter H.
Pym, Francis
Walker, Peter


Lubbock, Eric
Quennell, Miss J. M.
Walker-Smith, Rt. Hon. Sir Derek


Lucas, Sir Jocelyn
Rawlinson, Sir Peter
Ward, Dame Irene


Lucas-Tooth, Sir Hugh
Redmayne, Rt. Hon. Martin
Williams, Dudley (Exeter)


McAdden, Sir Stephen
Rees, Hugh
Williams, Paul (Sunderland, S.)


McLaren, Martin
Rees-Davies, W. R.
Wilson, Geoffrey (Truro)


Maclay, Rt. Hon. John
Renton, Rt. Hon. David
Wise, A. R.


Maclean,SirFitzroy(Bute&amp;N.Ayrs)
Ridley, Hon. Nicholas
Woodhouse, C. M.


Macleod, Rt. Hn. Iain (Enfield, W.)
Ridsdale, Julian
Woollam, John


McMaster, Stanley R.
Robson Brown, Sir William
Worsley, Marcus


Macpherson, Rt. Hn. Niall(Dumfries)
Russell, Ronald



Maltland, Sir John
Sharpies, Richard
TELLERS FOR THE AYES:


Marlowe, Anthony
Shaw, M.
Mr. Gordon Campbell and


Marples, Rt. Hon. Ernest
Skeet, T. H. H.
Mr. MacArthur.




NOES


Albu, Austen
Hale, Leslie (Oldham, W.)
Morris, John


Allaun, Frank (Salford, E.)
Hannan, William
Moyle, Arthur


Allen, Scholefield (Crewe)
Harper, Joseph
Neal, Harold


Awbery, Stan (Bristol, Central)
Hart, Mrs. Judith
Noel-Baker, Francis (Swindon)


Bence, Cyril
Hayman, F. H.
Oram, A. E.


Bennett, J. (Glasgow, Bridgeton)
Healey, Denis
Pannell, Charles (Leeds, W.)


Benson, Sir George
Henderson, Rt. Hn.Arthur(RwiyRegis)
Pavitt, Laurence


Blackburn, F.
Herbison, Miss Margaret
Peart, Frederick


Bowden, Rt. Hn. H. W. (Leics, S.W.)
Holman, Percy
Popplewell, Ernest


Boyden, James
Houghton, Douglas
Prentice, R. E.


Braddock, Mrs. E. M.
Hoy, James H.
Price, J. T. (Westhoughton)


Bray, Dr. Jeremy
Hughes, Cledwyn (Anglesey)
Probert, Arthur


Butler, Mrs. Joyce (Wood Green)
Hughes, Emrys (S. Ayrshire)
Pursey, Cmdr. Harry


Callaghan, James
Hughes, Hector (Aberdeen, N.)
Randall, Harry


Carmichael, Neil
Hunter, A. E.
Rankin, John


Castle, Mrs. Barbara
Irving, Sydney (Dartford)
Reynolds, G. W.


Cliffe, Michael
Janner, Sir Barnett
Roberts, Goronwy (Caernarvon)


Collick, Percy
Jeger, George
Robertson, John (Paisley)


Corbet, Mrs. Freda
Jenkins, Roy (Stechford)
Robinson, Kenneth (St. Pancras, N.)


Cronin, John
Jones, Rt. Hn. A. Creech (Wakefield)
Ross, William


Crosland, Anthony
Jones, Dan (Burnley)
Royle, Charles (Salford, West)


Cullen, Mrs. Alice
Jones, Elwyn (West Ham, S.)
Shinwell, Rt. Hon, E.


Cullen,, Mrs. Alice
Kelley, Richard
Silverman, Julius (Aston)


Darling, George
Kenyon, Clifford
Skeffington, Arthur


Deer, George
Key, Rt. Hon. C. W.
Small, William


Dempsey, James
King, Dr. Horace
Snow, Julian


Diamond, John
Lawson, George
Soskice, Rt. Hon. Sir Frank


Dodds, Norman
Lewis, Arthur (West Ham, N.)
Spriggs, Leslie


Ede, Rt. Hon. C.
Mabon, Dr. J. Dickson
Steele, Thomas


Edwards, Rt. Hon. Ness (Caerphilly)
MacColl, James
Stewart, Michael (Fulham)


Edwards, Walter (Stepney)
McInnes, James
Stonehouse, John


Fernyhough, E.
McKay, John (Wallsend)
Strauss, Rt. Hn. G. R. (Vauxhall)


Foot, Dingle (Ipswich)
McLeavy, Frank
Stross, Dr. Barnett(Stoke-on-Trent,C.)


Foot, Michael (Ebbw Vale)
MacPherson, Malcolm (Stirling)
Swingter, Stephen


Forman, J. C.
Mallalieu, E. L. (Brigg)
Thomas, George (Cardiff, W.)


Fraser, Thomas (Hamilton)
Manuel, Archie
Tomney, Frank


Galpern, Sir Myer
Marsh, Richard
Warbey, William


George, LadyMeganLloyd(Crmrthn)
Mayhew, Christopher
Wells, William (Walsall, N.)


Ginsburg, David
Mendelson, J. J.
Willey, Frederick


Gordon Walker, Rt. Hon. P. C.
Millian, Bruce
Williams, D. J. (Neath)


Grey, Charles
Mitchison, G. R.
Williams, Ll. (Abertillery)







Willis, E. G. (Edinburgh, E.)
Wyatt, Woodrow
TELLERS FOR THE NOES:


Wilson, Rt Hon. Harold (Huytod)
Yates, Victor (Ladywood)
Mr. Redhead and Mr. McCann.


Woof, Robert

Clause 44.—(AMENDMENT OF S. 130 OF ACT OF 1952 (CESSATIONS))

Question proposed, That the Clause stand part of the Bill.

Mr. John Diamond: I rise to save the Committee's time, having regard to the fact that the Financial Secretary gave us a clear and lucid explanation of the purpose of this Clause during the Second Reading of the Bill. He made it clear how this Clause was to be distinguished from the Clause we have just passed. He said:
…I should say that the main object of the proposal is to limit the opportunities for avoidance."—[OFFICIAL REPORT, 6th May, 1963, Vol. 677, c. 53.]
We understand and accept that, but immediately we are prompted to ask why it has taken so long for the Government to introduce this Clause. What I seek to do is to ask the Government two or three relevant questions.
This anti-avoidance provision, which we welcome up to a point, has been needed for a long time. From this side of the Committee we have many times made the case that these closing and opening provisions of a business were opportunities for tax avoidance, and that these should be stopped. Indeed, we have suggested methods by which they should be stopped, namely, that the assessments should be transferred from the previous year basis to the actual basis, and in this we have the support of distinguished bodies outside the House.
The Clause refers to the Income Tax Act, 1952, but the provisions which are being altered go back further than that. My first question, therefore, is: why has it taken the Government so long to deal with a Clause in respect of which there has been tax avoidance, bearing in mind that that tax avoidance has been brought to their attention time and time again by my right hon. and hon. Friends?
My next question is to ask the Government why, while they were tackling this problem, they did not go the whole hog? Why, instead of this adjustment which merely covers two years of the commencing years of a company's business, and merely has the effect of taxing the profits of the business on the basis of

the actual profits earned during those years, they did not go the whole hog and so adjust our taxation system that a company or a trader would pay tax on the profits actually earned during the lifetime of his business by being taxed on the profits?
What could be more just than that a trader should pay tax on the profits he makes, instead of on the profits he is deemed to make? What could be more just? What could be more equitable? I shall not go further and ask what could be more simple, because I recognise that there are perhaps one or two minor complications, but once we cross the bridge the matter would be straightforward for all time. The Government must recognise that we are moving more and more towards taxing profits on an actual basis, rather than on a previous year basis. Indeed—and I refer to it only shortly—the provision for substituting tax on rents for Schedule A Tax has been based on tax on actual rents received or earned as opposed to a notional figure, albeit that this may mean several readjustments and reassessments.
My third question is to ask why "1964–65" appears in the second line of the Clause? In short, why is it necessary for the Government to delay a whole year in closing this gap, once they have recognised that it exists and needs to be closed? Why is it that in recent years the Government have adopted the attitude of waving a red flag and blowing a whistle as hard as they can to show when they are proposing to apply tax avoidance measures? Why must we give an extra year's warning that anybody who seeks to continue the advantage which has been open to him for avoiding tax through manipulating in the closing years will be able to do so for a further year?
If the Economic Secretary says, in reply to my questions, "If the Opposition feel so keenly on these matters, why is it that they did not table specific Amendments to deal with the point about 1964–65 and the limitation of two years as opposed to going further?", I have a clear answer, which is a point of substantial complaint. The Financial Resolution on this was drawn so tightly—we


cannot debate it now, but perhaps I can refer to it—that it has been impossible to table Amendments on which to base a debate.
The Government have shown through their Financial Resolution that they are afraid to discuss the matter. What are they afraid of? Have they no confidence, no belief, in what they are putting forward? If this is not the reason, why should they tie us down so that we cannot put down Amendments to vary 1964–65? Why was it necessary to put 1964–65 in the Financial Resolution? We would have preferred to debate the separate matters and express our views on them.
All that we can do is to give a grudging welcome to the Clause which moves a step, but only a step, in the right direction, and this after years of delay and of prodding by my right hon. and hon. Friends.

The Economic Secretary to the Treasury (Mr. Edward du Cann): I am grateful for any welcome, even if it is only grudging, because, to quote the hon. Member for Gloucester (Mr. Diamond), this Clause is a step in the right direction. I agree with the hon. Gentleman's general opinion of this Clause. It is not a tremendous reform. I would not wish to pretend that it is, but it is, as he said, a step in the right direction.
The whole object of the Clause is to mitigate loss of revenue by the exploitation of the rules governing the assessment of trading and professional profits when a trade or profession ceases or is treated for tax purposes as ceasing. Because of his great experience the hon. Gentleman will know of the commencing rules and the cessation rules, and he will know—indeed he has emphasised the point—that there has been substantial trouble over this matter for quite a long time.
5.0 p.m.
In reply to the hon. Member's general complaint about tardiness, I hope that he will think it right to conclude that we have at least been progressing in the matter, in the sense that in 1954 we took specific action which cleared up some of the trouble. I do not suggest that no trouble remains, but we have taken some action, and this is a further piece of

action that we are taking in that progression.
The hon. Member asked how much further we were going, and why we had not gone further this time. I agree that the general aim must be to clear up the position entirely. As to the question of delay, I refer the hon. Member to the Budget speech of my right hon. Friend when he said:
The Inland Revenue is examining with the outside experts the possibilities of bringing taxation of company profits for Income Tax on to an accounts basis, as it is already for Profits Tax, which will remove many of the complications and anomalies that are inherent in the present provisions dealing with the opening and closing years of a business and give rise to so many difficulties".—[OFFICIAL REPORT, 3rd April, 1963; Vol. 674, c. 466.]
The hon. Member said that he thought that these difficulties were minor ones. That is not quite fair. They can be very serious. I have spoken of progress. My right hon. Friend foreshadowed consultations, and they are now taking place, so we are not delaying in that regard.
The hon. Member may ask why we are not legislating without consultation. He probably knows the answer to that better than I could give it to him. Any provisions made in a very serious, wide-ranging and most important matter of this sort must be generally acceptable to the people with whom we are dealing. I am not talking of those who may set out deliberately to defraud the Inland Revenue, but about the great mass of honourable people who are engaged in trade and industry.
I am sure that the hon. Member would agree that any system which seeks to provide for the taxation of these people must be one which is not only fair, but is seen to be fair—a system which is workable, practical, sound and sensible. I hope that the hon. Member will agree that in those circumstances it must be right that we should have these consultations, and base any future action that we may think it appropriate to take upon the results of those consultations.
In any event, I can go further and say that when we have a body of experience such as we so plainly have in the kind of bodies with which the hon. Member is so familiar, it is advantageous to the Inland Revenue to have the benefit of their advice and experience.

Mr. Diamond: The hon. Member suggested that I might not be in support of consultations taking place. Of course, I am in support of consultations. But I can see no reason why consultations should not have immediately followed the Act of 1954, which was passed nine years ago. Have the Government been engaged in consultations over those nine years? He said that it is right to take note of the views of bodies with which I am familiar. The Institute of Chartered Accountants has been making representations concerning a change to an actual basis for four or five years.

Mr. du Cann: I understand what the hon. Member is saying, and he is making a fair debating point, but he must agree that he seems to be suggesting that legislation on this subject is almost a matter of sitting down in front of a desk with a piece of paper and a pen and writing it. It is by no means as simple as that. He seemed to gloss over the complications and difficulties of the matter. This is an extraordinarily complex matter. Be that as it may, the past is past. The fact is that action is being taken now, and discussions are being carried on now.
The hon. Member's third question related to retrospection. If the change were to be made for assessments in 1963–64 it could affect assessments for 1961–62, and this could be criticised as being retrospective. It was with that point in mind that the Government decided to effect some sort of compromise.
I am grateful to the hon. Member for saying that the Clause has his support, even though he would like it to go further. I am glad to know, by inference at any rate, that he agrees that this is a useful and forward-looking proposal.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 45.—(ACCOMMODATION OCCUPIED BY HOLDER OF OFFICE OR EMPLOYMENT.)

Question proposed, That the Clause stand part of the Bill.

Mr. Barber: I want to clear up one point about which there seems to have been some misunderstanding. The Com-

mittee will recall that at an earlier stage I explained the general purpose of the Clause, and referred to it on a number of occasions when we were discussing Schedule 7.
I want to make it clear that the charge will extend only to people who are in law occupiers. This term excludes an employee who is required to live where he does for the proper performance of the duties of his employment, because such an employee is no more than a representative occupier—that is, he is on the premises merely as representing his employer. His employer is regarded by the law as the true occupier.
Representative occupiers have not been taxed in the past under Schedule A on the value of their occupation, and they will not be taxed under the Clause. We have considered whether, in order to make the position clearer, we should set out in the Clause some description of what is ment by representative occupiers who are not covered by the Clause.
The difficulty, as the hon. and learned Member for Kettering (Mr. Mitchison) will appreciate, is that the distinction between the occupier, who is within this Clause, and the so-called representative occupier, who is outside it, rests on a long line of decided cases in which the courts have said that the term "occupier", in relation both to Income Tax and to rating, does not include the person who lives in accommodation because he is required under the terms of his employment to live there for the proper performance of the duties of his employment. Where this condition is All-filled he lives on the premises merely as a representative of his employer, and the true occupier is the employer.
Persons who have been held by the courts to be representative occupiers, and so to be outside the Clause, include the police superintendent who is required to live in a house adjoining and belonging to a police station, the bank manager who is required to live on the premises, the Methodist minister, who is required to live in a manse provided by the circuit, and the colliery manager who is required to live in company premises near the pit head. Other persons excluded by the Inland Revenue are caretakers, some school masters who are obliged to live on the job, and farm workers living in tied cottages.
The important point is that in this Bill there is no change whatsoever in the principles which govern the question whether a person is an occupier proper or a so-called representative occupier. The principles which will apply on this point after the passing of this Bill are the same as those which have applied hitherto for the purposes of Schedule A. It was because I had received a number of letters from hon. Members on this point, and because they thought that there was some extension of or change in the distinction between an occupier and a representative occupier, that I thought that it would be helpful to say, on this occasion, that that is not so.

Mr. Douglas Houghton: The Committee is obliged to the Financial Secretary for that explanation. It sets at rest some of the doubts and anxieties which have been expressed by hon. Members on both sides of the Committee. Perhaps he will clear up a little later—or immediately, if he cares to do so—the position of police officers. He mentioned the case of the police superintendent who is required to live in a house adjoining a police station. There are many police officers who, while not required to occupy a house adjoining a police station, are nevertheless required to occupy a house provided by the police authorities. We should like an assurance that such representative occupiers, as they are described, will not be caught by Clause 45.
I was interested in the references to and definitions of occupiers which do not appear in the Clause and to those which are exempted by the Clause. The Clause deals with certain types of occupier without clearing up any doubts about other kinds of occupier. When we were discussing Schedule 7 I said something about Clause 45 being an anti-avoidance Clause as much as anything else, and the Financial Secretary said that he did not think he could go as far as that. But it seems clear that a lot of people have been occupying accommodation made available to them by their employers and have neither paid tax on the amenity value of the accommodation nor paid more for it than the tax on the actual Schedule A valuation.
During the Second Reading debate the Financial Secretary explained that those who pay no rent are nevertheless required to pay Schedule A tax. Since they have no rent from which to deduct the tax, the burden of that tax fell on them. Even if it did, it was good value for money. They paid only the Schedule A tax and not the full rent for the accommodation. Nor were they taxed on the full value of the accommodation. So there has been a great deal of untaxed amenity value here in one way or another.
There are a number of employers who, when officers are transferred or otherwise, offer accommodation on different terms to employees. Presumably that type of accommodation, in which the officers are not required to live, will come within the terms of Clause 45. The Financial Secretary referred to people required to live in the premises for the proper performance of their duties. A police officer could be required to live in certain accommodation in order to be in a particular place and available for the purposes of his duty in a more convenient manner, and would presumably, therefore, be exempt from the provisions of Clause 45. The Parliamentary Secretary can clear up that point.
Subsection (3) deals with the definition of "being available" to a person, and the Parliamentary Secretary has just explained that the Clause will deal only with those who are occupiers. Is this watertight? I do not know. There are some queer goings on in the hidden world of business and commerce, and one comes across cases where directors and executives seem to have facilities for the occupation of accommodation which, I suppose, could be regarded as available to them. But it might not be regarded as accommodation which they are required to occupy for the proper performance of their duties. If a managing director, for example, is asked by his firm—required by his firm, if hon. Members wish—as part of the conditions of his contract to occupy a luxury flat in the West End of London in order to be on the spot to entertain business guests and to present a certain posture of prestige and affluence to the community at large, does that requirement turn him into a representative occupier? I think that the Financial Secretary must have


enough material at his disposal to answer, and I am sure that he is adequately briefed to throw more light on this matter for the benefit of the Committee.
5.15 p.m.
Now that we are on this point, the dog may as well gnaw this bone and get the most out of it. The opportunities are few and far between. When we wish to put down new Clauses or Amendments with this sort of object in view, we are harassed by the Standing Orders or rules that we cannot put down things which will impose, directly or indirectly, a charge upon the citizen. So when we do get something which will achieve something along the lines that we wish we may be forgiven for pursuing the matter as far as seems right and proper. I hope that the Financial Secretary will be able to give an assurance.
We have disposed of Schedule 7. I was fully in agreement with what the Schedule proposes to do in relation to this Clause. The explanation by the Financial Secretary during the Second Reading debate seemed to suggest that this had been done because Schedule A was being abolished. But it seems to me that there was a case for doing something on these lines long before Schedule A was abolished. Since there is now no Schedule A in the background for the purpose of assessing the value of this accommodation, it is necessary to recreate in this special connection that elusive person the "hypothetical tenant". We have chased the hypothetical rent all round the houses. My hon. Friend the Member for Dunbartonshire, East (Mr. Bence) has pursued the hypothetical tenant with his hypothetical rent into a great and infinite variety of hypothetical situations, and we are not encouraging my hon. Friend to try to do the same kind of thing again this afternoon.
I think that Schedule 7 is right in this connection, that we should erect a value under current letting conditions, current values, in order to apply it to Clause 45. We can no longer apply Schedule A. It has gone, and something has to be put in its place. I think that we are reassured on subsection (6) which will stop a person hiding behind his wife's occupation in order to avoid the consequences of this Clause. I shall have to take sub-

section (3) and the definition of being available to as being the best which could be done with the definition which is, of course, fundamental to the application of the Clause.
I have given a blessing to Clause 45, for which the Financial Secretary will be grateful. We should like to know that it does exclude persons who surely ought to be excluded, and we hope that it will catch the people who ought to be caught.
I am glad that the Financial Secretary gave an explanation before it was necessary for me to rise to ask for one. Earlier I rebuked the occupants of the Treasury Bench for becoming slovenly and said that when a Clause came along it was their duty to explain what the Clause was about. I rather thought that the Treasury Bench was slipping. was about to say that perhaps we could get some understanding of the rules in this matter.
We do not ask a Treasury Minister to rise and explain a Clause when we know what it means, although we may ask him to explain a Clause when we want to lay a snare for the Minister, as in the case of my hon. and learned Friend the Member for Kettering (Mr. Mitchison) on Clause 43. [An HON. MEMBER: "Oh dear."] Well, he fell into something, did he not? We thought there was a genuine tax relief being given, but we found it was merely making honest people of those who had been avoiding the tax far some years past. That certainly was a revelation. It followed the Government's well-known policy of when they are unable to enforce the law to change the law so as to remove further opportunities for breaking it. That is what they did with regard to betting, and one day they will do it with regard to the speed limit. They have done it in connection with Income Tax. The assurances for which we ask can no doubt be given both as to exemptions and those to be included under the Clause.

Mr. Graham Page: I hesitate to rise to comment in case I should qualify as one of the dogs of whom the hon. Member for Sowerby (Mr. Houghton) spoke, or as one of the snares referred to in relation to the hon. and learned Member for Kettering (Mr. Mitchison). Although I must humbly congratulate my hon. Friend the


Economic Secretary on the admirable summary of the law he gave, unfortunately the General Commissioners, the Special Commissioners and the judges are not apt to read speeches made by my hon. Friend in this Committee. Although he may have set out the law very fully and ably, I should have thought it better to state it in the Clause itself.
There must surely be a reasonable definition of a service tenant as opposed to an occupier. We find again and again in the law a distinction is made between the two, but that does not mean that the service tenant is not an occupier. That is where the confusion arises in the wording of this Clause. It speaks of "the occupier", a phrase which is comprehensive of the service tenant, the person who is in a house by reason of his employment. On a first reading one would have thought it included many of those categories which my hon. Friend excluded.
I should have hoped that some words could have been put into the Clause to make perfectly clear who are caught by it and who are not caught. I can think of instances which my hon. Friend has not mentioned, such as the brewery manager. There are many such as those on whom the hon. Member for Sowerby touched. There are directors of companies who have show houses for the purpose of entertaining. I do not say that is wrong. It is a form of advertisement, a form of sales promotion; but where do we class them under this Clause?
My second question on the Clause is about annual values. I shall not go back to the discussion on the Seventh Schedule, but it is important in this connection to know how the man who is to be taxed under this Clause shall know what the figure of annual value is. At present he knows the Schedule A value, but the only clue he has in this Clause is that annual value is to be determined in accordance with the Seventh Schedule. By whom and when will it be determined? How will he know the figure? When does his taxation under this Clause commence? From what date does it start, and when does it come into effect against P.A.Y.E.?
This is against Schedule E, and it will he puzzling to the man coming within the Clause when he is called upon to pay

a substantial amount of increased tax because, whereas he was allowed Schedule A, it will now be annual value, which will be three or four times as much as the previous figure. He will want to know from when that is to start, when he will know definitely what the figure is, and when it will be taken into account against his P.A.Y.E.

Mr. Cyril Bence: I have a question to ask in respect of this Clause. I was about to ask two questions, but one of them has now been answered. I was going to ask about the lighthouse keeper, but I now understand that he would be in the same position as a janitor. I want to ask, first, about the "representative occupier" and the adding of his emolument to his income because he lives in a house which is part of the job he has taken.
In the development districts, local authorities provide houses for key workers in some industries. This happens particularly when a company takes a factory in a development district in Scotland. The company gets into touch with the local authority which provides a dozen or twenty houses for key workers. Workers occupy those houses because they are taking jobs as key workers. This happens in my constituency. The annual rent of many of these houses is lower than the annual gross value. Those men cannot be said to be "representative occupiers" because the houses are owned by the local authority and they are not representatives of the local authority. The houses are not owned by the company employing those workers. Can those workers be caught by this Clause?
A skilled worker may go from a Rootes factory in Birmingham to a factory at Linwood and the local authority provides a house, but the rent is lower than the gross annual value. Can the Revenue add the rent because that is a house which goes with the job? This worried me when I first read the Clause. I wondered whether a man in that position would be caught by it. In the industrial belt of Scotland and in the North-East there are thousands of key workers in that position. The houses are not tied houses because they do not belong to the companies employing the workers.
They are not tied in the same way as 10, Downing Street, 11, Downing Street, or Chequers. Is the annual value of 10, Downing Street added to the Prime Ministers salary as an emolument? I do not know if that is so, but in this case there are public properties and the annual valuation cannot be fixed on normal principles because the houses are not free for letting. It is an annual value arrived at by discussion and agreement. Under the Scottish Rating and Valuation Act agreements are made in respect of domestic properties. This is done in the case of lighthouses. I remember a debate on this in Scottish Grand Committee, and debates on these things in that Committee are always very interesting. We had a long debate on Scottish lighthouses. What is the gross annual value of a residence attached to a lighthouse? It is not free to be let to anyone. Who would want to live in a lighthouse except a lighthouse keeper?
Many properties, although they do not belong to the employer, go with the job. I saw a man recently who had been provided with a house which did not belong to his employer but which had been provided for a worker coming into the job he held. What is the position of a man who is living in a house provided for him as a result of taking a job but not provided by his employer'? Sometimes he pays no rent; it is paid by his employer. Alternatively, if it is a local authority house the rent which he pays may be lower than the gross annual value of the house. Would the difference be added to his emoluments from his employers?

5.30 p.m.

Mr. McMaster: I am grateful to my hon. Friend for his help but I should like to raise with him a matter arising from the strictly legal definition which is always given to these words when they are interpreted in the courts. As has been said, judges are apt not to read our debates. I am concerned with the strict use of the word "occupier" in law. What happens if a person simply uses the premises but does not qualify as an occupier at law? Would it not be wise to look again at the Clause and if necessary to move an Amendment on Report to deal with the situation in which the person using the premises is not an

occupier but is getting a benefit from the premises and therefore may be subject to tax?

Mr. Barber: May I reply first to my hon. Friend the Member for Belfast, East (Mr. McMaster)? The provisions of the Clause make no change whatever in the definition of an occupier, and I have not had brought to my attention any circumstances which would warrant any change. If my hon. Friend has any point in mind and he would like to contact me about it, I will look into it. But it was not the purpose, and it is not the effect, of the Clause to make any change in the definition of an occupier.
The hon. Member for Sowerby asked me, in particular, about the position of a police officer living in accommodation provided for him by the police force but not necessarily part of a police station. In normal circumstances, if the house were connected to a police station, I think that he would be a representative occupier. But if it is merely an ordinary dwelling which is provided for him by the police authority, the situation may be different.
For reasons which the hon. Member appreciates, it is difficult to be precise about particular cases without knowing the full circumstances. The word "occupier" to which this Clause refers does not include a person who lives in accommodation because he is required under the terms of his employment to live there for the proper performance of the duties of his employment. Those are the words which the hon. Member repeated. But the system would be wide open to avoidance if the obligations were not those which arose from the nature of the particular person's duties, and an arbitrary instruction by the employer is not in itself sufficient, I come back to what I said previously—that the Clause makes no change whatever in the principles which govern the question whether the person is an occupier proper or whether he is a so-called representative occupier.

Mr. Mitchison: Am I right in understanding that people who have lived in a house previously in conditions which did not make them liable to tax will remain not liable to tax?

Mr. Barber: Unless I have the precise circumstances given to me I am not


sure exactly how it works out in every case which is covered by the anti-avoidance provisions in Sections 161 and 162 of the Income Tax Act, 1962. They deal, broadly speaking, with the position of directors and others with incomes over £2,000 a year, but in the normal case this will apply to the person who hitherto paid Schedule A on a house which was provided for him by his employer either rent free or an an economic rent. In future he will pay under Schedule E in accordance with the provisions of Schedule 7 of the Bill.
This is fair, because an employee who is provided with a house rent-free or at an uneconomic rent in reality has it as an emolument of his employment, and it is reasonable to tax it. Some employees are provided with a house rent free if one is available. Others, where a house is not available, receive additional salary in lieu of a provision of a house. It is surely right that they should receive broadly the same tax treatment.

Mr. Mitchison: In view of what my hon. Friend the Member for Sowerby (Mr. Houghton) said, I assure the hon. Member that there is no trap in my question. I recognise that this is a very difficult matter. But I understood him to say that no person who had occupied a house and had not been liable to pay tax on it before would become liable to pay tax on it by reason of the Clause. The instance which he gave about Schedule A conforms to that, because tax has been paid before in a different form. But if I am wrong in that assumption, I wish that the hon. Member would explain exactly what he means.

Mr. Barber: I know of no case in which a person who previously did not pay Schedule A would under this Clause pay tax under Schedule E, other than probably certain people who previously did not pay tax under Schedule A but were assessed to tax under Schedule E under the anti-avoidance provisions which were introduced to deal with directors and others with incomes over £2,000 a year. They previously paid tax under Schedule E. It is difficult to answer off the cuff, but I think that they will now be governed by this Clause, which is also concerned with Schedule E. That is why I could not answer the hon. and learned Gentleman precisely.

Mr. Callaghan: I am consultant to the Police Federation. What the hon. Member said could be contradictory. Policemen do not pay tax under Schedule A at the moment because they are required to live in houses provided by the police authority, but a number of those houses are not attached to police stations. They are nevertheless required to live there and can be transferred from one to another. I understood the hon. Member to say earlier that in those circumstances they might be assessed under Schedule E because the houses are not attached to police stations.

Mr. Barber: I am sorry if, with a desire to be as accurate as possible and not to mislead the Committee or those outside, I did not give the hon. Gentleman the right impression. It does not follow that, because a person does not live, as it were, on the site where he works or carries out his duties, he cannot be a representative occupier and thus be outside the ambit of the Clause. It is not sufficient for an employer merely to give an arbitrary instruction—a police authority to a police officer—that he must live in a particular house if living in it is not connected with his duties. He must have to live there for the proper performance of his duties. I understood the hon. Member for Cardiff, South-East (Mr. Callaghan) to say that in the past a police officer had been exempt from Schedule A, presumably on the ground that he was a representative occupier.

Mr. Callaghan: There is no intention to alter the present conditions of service of the police to the operation of the Clause?

Mr. Barber: I am sure that that will not be the case. I can certainly give that assurance to the hon. Member.
The hon. Member for Sowerby said that I had given the impression that this provision had been introduced as a consequence of the abolition of Schedule A and he thought that this was not the right impression for me to have given. There is a strong connection between the operation of Schedule A and the Clause. Had Schedule A not been abolished there would have been a at current prices, and the result would revaluation of all the properties involved, have been much the same as this charge


under Schedule E. It is because there is to be no revaluation—because Schedule A has gone—that it has been necessary to make this provision.
My hon. Friend the Member for Crosby (Mr. Graham Page) and my hon. Friend the Member for Belfast, East raised a number of points. They both thought that I had made what was a clear statement of the law concerning occupiers proper and representative occupiers. My hon. Friend the Member for Crosby pointed out that the courts and Special Commissioners would not be able to read or take note of what I had said. I think that any efficient solicitor, like my hon. Friend, would draw attention to the case law on this point; and since my statement was based on that law the result, I hope, would be the same.
My hon. Friend the Member for Crosby asked from which date the provision would operate. The answer is from 6th April, for the year 1963–64 onwards. He also asked how the taxpayer would know what valuation was put on his property for the purposes of Clause 45. The answer, broadly speaking, is that he would find this out from the notice of assessment. I have not been able to ascertain the details of the provisions for appeal, but I can assure my hon. Friend that they exist and that they would be broadly analogous to the sort of rights which a person would have of appeal against a Schedule A valuation.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clauses 46 to 48 ordered to stand part of the Bill.

Clause 49.—(EXTENSION OF EXEMPTION FOR SMALL ESTATES.)

Mr. Mitchison: I beg to move, in page 50, line I, to leave out "ten thousand" and insert "twelve thousand five hundred".
I think that it would be convenient for the Committee if we could at the same time discuss the following Amendment, in page 50 leave out lines 5 to 9 and add:

"Not exceeding £10,000
Nil


Exceeding £10,000 and not exceeding £11,000
2


Exceeding £11,000 and not exceeding £12,500
4".

The Temporary Chairman (Sir Herbert Butcher): If that is satisfactory to the Committee.

5.45 p.m.

Mr. Mitchison: The Amendment is designed to go one step further in this respect than the Government have already gone. It concerns the exemption from Estate Duty in favour of small estates—a duty which has lasted for a great many years and which, hitherto, has ranged up to £4,000. The Government would increase the exemption up to £5,000 and make the appropriate alterations at the bottom of the scale to hitch it on, so to speak, to the existing table, but we propose, faithfully following an interjection made by my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) in the Budget debate, to raise the £5,000 to £10,000 and, again, to make the appropriate changes at the bottom of the scale. The substantial point is that we wish to increase the exemption to £10,000 in respect of the existing £4,000 or the Government's £5,000.
I find from my experience in my constituency—and I have no doubt that other hon. Members find the same—that there are many cases nowadays where a middling or small estate—and we are talking about that kind of property now —consists largely of a house in which the family has lived. I suspect that the real reason why the Government have introduced their change—and I do not wish to quarrel with them over it, although it does not go as far as we would wish—is the increasing value of houses throughout the country, particularly in the towns.
I need not elaborate upon this, for we all know about the rise in the prices of houses. They have gone up at a very rapid rate and to a considerable extent. Where one used to pay so much for a house one must now pay three times as much, certainly in the large towns. This has particularly affected the type of house in which the typical small man lives; a house of a moderate size, saleable under present conditions and very much favoured at the moment for good or ill as a result of the Government's failure to arrange for sufficient houses to let. I will not develop this argument at length. We are debating the Finance Bill and not the Government's housing policy. We


all know that the effect of recent legislation has been to oblige more and more people to buy houses. We can argue about whether or not that is an advantage another time. The result of it, one might say, has been to steady the market, although it has really pushed up prices considerably. This is substantially the point behind the Amendment.
I hope that no one will put forward the time-honoured and totally untrue argument that the Labour Party has any objection to owner-occupiers. Indeed, we on this side of the Committee have done more for them in the past than hon. Members opposite. [HON. MEMBERS: "Oh."] We always get those sort of noises made by hon. Members opposite when this is said, but it is we who introduced the improvements. However, for present purposes these remarks are off the mark. Perhaps it was my fault for trailing my coat a little.
We are really considering the question of small estates, but with the principle of my remarks in view. The value of money has changed and the result has been that what appears to be worth so much in terms of spending nowadays probably corresponds to about one-third of that sum years ago. I will leave the matter as vague as that. The increase from £4,000 to £5,000 is all right as far as it goes, but it does not go far enough to meet the needs of the situation. It is, therefore, not just in a sort of huckstering spirit of who can offer most, but in the real belief that more ought to be done in these cases, that I move this Amendment.
Judging from the figures we have been given of the effect of the Government's Amendment, the cost will be substantial but hardly prohibitive, and if anyone intends to make nasty comparisons, I can only say—just wait until we come to the cost of the concession on stamps. Again, if we are to be told that this is really too much at once, I think that this is a case where the enlargements of the limit of exemption have fallen behind the sheer rapidity in the rise, in this case, of house prices, and that it is time that we caught up with what has happened. So it is mainly on the ground of the rise in the cost of house property—and there are numerous cases where by far the

largest part of the estate takes that form —that this Amendment has been put down.
I would add that where one has an estate that substantially consists of nothing but a house, it may be very difficult to raise the money to pay Estate Duty. I do not say that it will be impossible, but it may make things much harder. I am trying to put what I believe to be a reasonable and fair case in as quiet and reasonable a way as I possibly can and, once again, I assure the Financial Secretary that I am laying no traps for him, but merely trying to keep him up to date.

Mr. Donald Wade: I support the Amendment, or at least the intention behind it. It is true that this staggering increase in the value of house property, particularly in London and the South-East, can have serious effects on an estate consisting mainly of a house and not other substantial assets. Two or three sisters may live together, having no great savings, and die one after the other in a comparatively short time. In such a case, there are no special provisions for exemption as there are, I think, in the case of husband and wife. If that estate consists mainly of a house, the house simply must be sold to pay the Estate Duty. That is the problem we have to face.

Mr. Bruce Millan: While I support the Amendment, I cannot do so with great enthusiasm if it is to be considered in isolation. There is a very strong argument for removing the lower rates of Estate Duty, but T would prefer that to be done as part of a very much more radical reform of the duty as a whole. With Estate Duty, as with a number of other taxes—but with Estate Duty more than any other—we have the rather absurd position of high nominal rates of tax, on the one hand, but very much lower effective rates of tax, on the other. That is an extremely unsatisfactory position, and gives us the worst of all worlds.
From the present Government's point of view, that is probably not a bad thing. Pointing to rates of Estate Duty that go up to no less than 80 per cent., they can say, "Look how we tax capital. Look how radical we are in the distribution of capital." They can use that


argument particularly when the complaint may be made that we do not have a capital gains tax, because they can then say that we do not need a capital gains tax or anything else because we have these high rates of Estate Duty.
It is true that we do have high rates of Estate Duty, but the simple fact is that those high rates have made very little impact on the distribution of wealth. Wealth is still remarkably unequally distributed, as one can see by reference to the Estate Duty statistics. About 2 per cent. of the estates passing in any one year comprise about 50 per cent. of the capital involved—

The Temporary Chairman (Sir Herbert Butcher): The hon. Member is going somewhat wide of the Amendment before the Committee.

Mr. Millan: I am only relating this to the Amendment, Sir Herbert. If you will be good enough to be patient for a moment more you will probably see that my argument is relevant.
While we have this high rate at the top end of the scale we have, at the other end, low rates, which we are now amending by the Government's Clause, resulting in the bringing into Estate Duty of large numbers of small estates. I estimate that probably 40,000 estates of up to £10,000 are falling into Estate Duty annually out of a total of, perhaps, 65,000. That large number of small estates clutters up the Revenue in its administration of the whole of Estate Duty.
There is, therefore, very strong argument for removing them from the duty altogether, and allowing the Revenue to get on with what ought to be its proper job of looking after the administration of Estate Duty on the much larger estates. We clutter up our administration with all these small estates, but do not effectively tax the much larger estates.
Even if the yield of taxation were to be exactly the same, I would much rather we had more rates for Estate Duty, and very much more effective rates. That would involve a new look at the whole question—

The Temporary Chairman: I would rather the hon. Gentleman did not pursue that argument at this moment.

Mr. Millan: The trouble with this Amendment is that while it tackles the problem at the lower end of the scale, it does absolutely nothing about tackling it at the higher end. While I would have no objection at all to the kind of remission proposed by the Amendment —which, I understand, would cost about £10 million—my support would be much more enthusiastic if I thought that, at the same time, we were to do something very much more effective about Estate Duty, taken as a whole, than is at present the case.
There is no sign at all in the kind of minor reform the Government make in Clause 49 that they have the slightest intention of doing that. For that reason, I can give the Amendment only the most qualified kind of support.

Mr. Graham Page: It should not be thought that silence on the back benches on this side of the Committee implies that we are not very anxious to see further reductions in Estate Duty. This Clause is another step made by the Government towards relieving small estates of duty. It is another instalment, as it were, and the Amendment is a rather Oliver Twist Amendment, asking for more. Both sides of the Committee would be pleased to see greater relief given to the smaller estates whenever the Chancellor finds he has the money to devote to this purpose.
The hon. Member for Huddersfield, West (Mr. Wade) mentioned three sisters. One does not need to go as far as that. I have an example of two sisters living very simply and yet, because they died within a short time of one another, their very small estates became liable to duty. The more we can relieve these sort of estates from duty, the better. There are tragic circumstances where several members of a family die about the same time and the Estate Duty accumulates. I should have thought that the figure in the Amendment is too low once the Chancellor can find the funds to do this. I hope that we shall continue this process of relieving small estates from Estate Duty, and for that reason I welcome the Clause.

6.0 p.m.

Mr. J. T. Price: I rise to express my own scepticism along with that already expressed by my hon. Friend the Member


for Glasgow, Craigton (Mr. Millan). I am prepared to concede that the case for the genuine small estate has been most reasonably and temperately made out by my hon. and learned Friend the Member for Kettering (Mr. Mitchison). We all recognise that many people who live in their own houses may have insurance policies or an annuity by way of superannuation which is transferable to next-of-kin in the case of widows and which is assessed for Estate Duty on its capital value.
I would not stand in the way of relief being granted to a genuine successor to a small estate where otherwise there would be hardship. We are all familiar with the family left with a little property in bricks and mortar, but with no income in the way of liquid assets to go with it, but, quite seriously, I look at the question like my hon. Friend the Member for Craigton in expressing a sceptical view of the Amendment. I am prepared to support it for the reasons given, and if the resources can be found to meet it, that would be very desirable.
We are, however, all sufficiently sophisticated to know that although high rates of Estate Duty are chargeable at the upper end of the scale—for example a 40 per cent. rate at about £50,000, and an 80 per cent. rate for the tycoons who are in the millionaire class—people who have large estates make arrangements for their successors to avoid as much imposition of Estate Duty as possible. There are all kinds of covenants—

The Temporary Chairman: Order. The Amendment does not deal with covenants.

Mr. Price: I am sorry, Sir Herbert. I want to keep strictly in order, but this Amendment is related to the whole scale of Estate Duty.
There are only three categories of duty in the Amendment, but surely the logic of it, which we on this side of the Committee may live to regret, is that it may give encouragement to the Conservative Party in the future to tamper with the upper range of Estate Duty. If that happens, we shall have something to say. I do not believe that receipts from Estate Duty are anywhere near in true relation to the totality of the estates. The total global Estate Duty does not bear any

relationship to the increased prosperity of the wealthy classes in this country. If I may say so without offence, and with the greatest good will to everybody in the Committee, I am being strictly liberal in this. I make no party "crack" about it. The whole spectrum of Estate Duty—

The Temporary Chairman: Order. We are dealing only with the Amendment which is before the Committee.

Mr. Price: In that case, I will keep off the spectrum, Sir Herbert. After having no doubt wearied the Committee by this dissertation, I would say, in conclusion, that while I support the Amendment, because I think that in the genuine case it will do good, overall I am critical of it because it may open the door to other things.

Mr. Barber: In view of what the hon. Member for Westhoughton (Mr. J. T. Price) has just said, I rise with the best of intentions to do what I can to answer the debate. I am sure that we all listened with interest to the hon. Member for Glasgow, Craigton (Mr. Millan) who, in two-and-a-half minutes, managed to mention Estate Duty, an inheritance tax, a wealth tax and a capital gains tax. I doubt, Sir Herbert, with you in the Chair, whether I shall follow the hon. Member in that respect.
The Amendments are simple in effect. They would replace the proposal contained in the Clause for increasing the Estate Duty exemption limit with proposals of a wider character. Under the Clause, the exemption limit is to be raised from £4,000 to £5,000, with consequential adjustments. The Amendments would raise the limit to £10,000 with other adjustments. The question at issue is simple. My hon. Friend the Member for Crosby (Mr. Graham Page) referred rightly to what had been done in the past. I remind the Committee that this is the third occasion in the last nine years when the Conservative Government have raised the exemption limit. In 1954, it was raised from £2,000 to £3,000. Last year, it was raised from £3,000 to £4,000, and now, again, my right hon. Friend proposes to raise it to £5,000.
As the hon. and learned Member for Kettering (Mr. Mitchison) reminded us, when my right hon. Friend was


announcing this additional step in his Budget statement, the hon. Member for Cardiff, South-East (Mr. Callaghan) took the somewhat unusual course of intervening to inform the Committee that he regarded the move as trifling. This seems to me a somewhat odd comment to come from the Opposition. In the first place, we should remember that after raising the exemptlon limit in 1946 the Labour Government never bothered with it again during the whole of their period of office.
The cost of the Labour Government's action in 1946 was only £500,000 more than the proposal of my right hon. Friend, which the hon. Member for Cardiff, South-East now calls trifling. The hon. Member, of course, may have something far from trifling in mind, because on that one and only occasion when the Labour Government raised the exemption limit they increased the Estate Duty to yield an additional £20 million. That may be the sort of thing that the hon. Members for Westhoughton and Craigton have in mind.
There is a second reason why it is odd to describe this proposal as trifling, and think that this would please the hon. Member for Craigton. My right hon. Friend's proposal would free altogether from Estate Duty one-fifth of all estates at present paying Estate Duty. In addition, another quarter would receive additional benefits from a reduction in the rates. I agree, of course, that it would he attractive to do what is suggested in the Amendments. Obviously, it is something that would be welcomed throughout the country, but it would cost 1:8½ million in a full year and we have

to consider whether relief, costing about £8 million to £9 million in Estate Duty, should have this further priority beyond that proposed by my right hon. Friend this year, unless, of course, one were introducing a wealth tax to tax the very same people while they were alive.

My right hon. Friend has taken what I think the whole Committee will agree is a useful step forward in exempting the one-fifth of all estates which pay duty and benefiting another quarter. While I appreciate the points which have been made by hon. Members opposite, and though I hope that, in the future, we may be able to carry on with the good work which has been done by successive Chancellors in the past few years, I cannot advise the Committee to go further this year and I must therefore, ask that these Amendments be rejected.

Mr. Mitchison: I always know when the Government are in difficulties. They begin not by defending their own case, but by selecting, in a very selective fashion, certain facts from the past. There is one which they always omit, the last war. We were in power quite soon after it.
As to the cost of what we suggest, I will not repeat the figures. The cost of the Stamp Duty concessions is four or five times what is asked for here, and what we propose is a far more necessary step in a far more necessary direction.

Question put, That "ten thousand" stand part of the Clause:—

The Committee divided: Ayes 191, Noes 131.

Division No. 122.]
AYES
[6.10 p.m.


Allason, James
Boyle, At. Hon. Sir Edward
Courtney, Cdr. Anthony


Arbuthnot, John
Braine, Bernard
Craddock, Sir Beresford (Spelthorne)


Atkins, Humphrey
Brewis, John
Critchley, Julian


Awdry, Daniel (Chippenham)
Brooman-White, R.
Crowder, F. P.


Balniel, Lord
Brown, Alan (Tottenham)
Curran, Charles


Barber, Anthony
Bullus, Wing Commander Eric
Currie, G. B. H.


Barlow, Sir John
Burden, F. A.
d'Avigdor-Goldsmid, Sir Henry


Barter, John
Butler, Rt. Hn. R. A. (Saffron Walden)
Digby, Simon Wingfield


Batsford, Brian
Carr, Compton (Barons Court)
Drayson, G. B.


Baxter, Sir Beverley (Southgate)
Carr, Robert (Mitcham)
du Cann, Edward


Beamish, Col. Sir Tufton
Chichester-Clark, R.
Duncan, Sir James


Bell, Ronald
Clark, Henry (Antrim, N.)
Elliot, Capt. Walter (Carshalton)


Bennett, Dr. Reginald (Cos &amp; Fhm)
Clark, William (Nottingham, S.)
Emmet, Hon. Mrs. Evelyn


Berkeley, Humphry
Clarke, Brig. Terence(Portsmth, W.)
Errington, Sir Eric


Biffen, John,
Cleaver, Leonard
Farey-Jones, F. W.


Biggs-Davison, John
Cooke, Robert
Fell, Anthony


Bingham, R. M.
Cooper, A. E.
Finlay, Graeme


Bishop, F. P.
Cooper-Key, Sir Neill
Fletcher-Cooke, Charles


Black, Sir Cyril
Cordeaux, Lt.-Col. J. K.
Galbraith, Hon. T. G. D.


Bourne-Arton, A.
Corfield, F. V.
Gammans, Lady


Boyd-Carpenter, Rt. Hon. John
Coulson, Michael
Gardner, Edward




Glyn, Sir Richard (Dorset, N.)
Lloyd, Rt. Hn. Geoffrey(Sut'nC'dfield)
Renton, Rt. Hon. David


Goodhew, Victor
Longbottom, Charles
Ridley, Hon. Nicholas


Grant-Ferris, R.
Longden, Gilbert
Robson Brown, Sir William


Gresham Cooke, R.
Loveys, Walter H.
Roots, William


Grosvenor, Lt.-Col. R. G.
Lucas, Sir Jocelyn
Russell, Ronald


Gurden, Harold
Lucas-Tooth, Sir Hugh
Sharples, Richard


Hall, John (Wycombe)
MacArthur, Ian
Shaw, M.


Hamilton, Michael (Wellingborough)
McLaren, Martin
Skeet, T. H. H.


Harrison, Brian (Maldon)
Maclay, Rt. Hon. John
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Harrison, Col. Sir Harwood (Eye)
Maolean,Sir Fitzroy(Bute&amp;N.Ayrs)
Smyth, Rt. Hon. Brig. Sir John


Harvey, Sir Arthur vere (Macclesf'd)
Macleod, Rt. Hon. Iain (Enfield, W.)
Spearman, Sir Alexander


Harvey, John (Walthamstow, E.)
MacLeod, John (Ross &amp; Cromarty
Stevens, Geoffrey


Hastings, Stephen
McMaster, Stanley R.
Steward, Harold (Stockport, S.)


Henderson, John (Cathcart)
Macpherson, Rt. Hn. Niall(Dumfries)
Studholme, Sir Henry


Hiley, Joseph
Maitland, Sir John
Tapsell, Peter


Hill, Dr. Rt. Hon. Charles (Luton)
Marples, Rt. Hon. Ernest
Taylor, Frank (M'ch'st'r, Moss Side)


Hill, J. E. B. (S. Norfolk)
Marshall, Douglas
Teeling, Sir William


Hirst, Geoffrey
Matthews, Gordon (Meriden)
Temple, John M.


Holland, Philip
Mawby, Ray
Thatcher, Mrs. Margaret


Hope, Rt. Hon. Lord John
Maxwell-Hyslop, R. J.
Thompson, Sir Richard (Croydon, S.)


Hopkins, Alan
Maydon, Lt.-Cmdr. S. L. C.
Thornton-Kemsley, Sir Colin


Hornby, R. P.
Mills, Stratton
Touche, Rt. Hon. Sir Gordon


Hornsby-Smith, Rt. Hon. Dame P.
Mlscampbell, Norman
Turner, Colin


Hughes Hallett, Vice-Admiral John
Morgan, William
Turton, Rt. Hon. R. H.


Hughes-Young, Michael
Morrison, John
Tweedsmulr, Lady


Hutchison, Michael Clark
Nabarro, Sir Gerald
van Straubenzee, W. R.


James, David
Heave, Alrey
Vane, W. M. F.


Jenkins, Robert (Dulwich)
Page, John (Harrow, West)
Vickers, Miss Joan


Johnson, Dr. Donald (Carlisle)
Page, Graham (Crosby)
wakefield, Sir Waveli


Johnson, Eric (Blackley)
Pannell, Norman (Kirkdale)
Walder, David


Johnson Smith, Geoffrey
Pearson, Frank (Clitheroe)
Walker, Peter


Jones, Arthur (Northants, S.)
Peel, John
Walker-Smith, Rt. Hon. Sir Derek


Jones, Rt. Hon. Aubrey (Hall Green)
Percival, Ian
Ward, Dame Irene


Kaberry, Sir Donald
Plckthorn, Sir Kenneth
Williams, Dudley (Exeter)


Kerans, Cdr. J. S.
Pitman, Sir James
Williams, Paul (Sunderland, S.)


Kerr, Sir Hamilton
Pitt, Dame Edith
Wilson, Geoffrey (Truro)


Kershaw, Anthony
Powell, Rt. Hon. J. Enoch
Wise, A. R.


Kirk, Peter
Price, David (Eastlelgh)
Woodhouse, C. M.


Lagden, Godfrey
Prior, J. M. L.
Woollam, John


Lancaster, Col. C. G.
Pym, Francis
Worsley, Marcus


Leavey, J. A.
Rawlinson, Sir Peter



Leburn, Gilmour
Redmayne, Rt. Hon. Martin
TELLERS FOR THE AYES:


Legge-Bourke, Sir Harry
Rees, Hugh
Mr. Ian Fraser and


Linstead, Sir Hugh
Rees-Davies, W. R.
Mr. Gordon Campbell.




NOES


Albu, Austen
Gordon Walker, Rt. Hon. P. C.
McKay, John (Wallsend)


Allaun, Frank (Salford, E.)
Grey, Charles
McLeavy, Frank


Allen, Scholefield (Crewe)
Griffiths, Rt. Hon. James (Llanelly)
Mallalieu, E. L. (Brigg)


Bence, Cyril
Grimond, Rt. Hon. J.
Mallalieu, J.P.W. (Huddersfield, E.)


Bennett, J. (Glasgow, Bridgeton)
Hale, Leslie (Oldham, W.)
Manuel, Archie


Benson, Sir George
Hannan, William
Marsh, Richard


Blackburn, F.
Harper, Joseph
Mayhew, Christopher


Bowden, Rt. Hn. H. W. (Leies, S.W.)
Hart, Mrs. Judith
Mendelson, J. J.


Boyden, James
Hayman, F. H.
Millan, Bruce


Bray, Dr. Jeremy
Healey, Denis
Mitchison, G. R.


Brown, Rt. Hon. George (Beiper)
Henderson,Rt.Hn.Arthur(RwlyRegis)
Morris, John


Callaghan, James
Herbison, Miss Margaret
Moyle, Arthur


Carmichael, Neil
Hilton, A. V.
Neal, Harold


Castle, Mrs. Barbara
Holman, Percy
Noel-Baker, Francis (Swindon)


Chapman, Donald
Houghton, Douglas
Oram, A, E.


Collick, Percy
Hughes, Emrys (S. Ayrshire)
Paget, R. T.


Cronin, John
Hughes, Hector (Aberdeen, N.)
Pannell, Charles (Leeds, W.)


Crosland, Anthony
Hunter, A. E.
Parker, John


Crossman, R. H. S.
Irvine, A. J. (Edge Hill)
Popplewell, Ernest


Cullen, Mrs. Alice
Irving Sydney (Dartford)
Prentice, R. E.


Dalyell, Tam
Jeger, George
Price, J. T. (Westhoughton)


Darling, George
Johnson, Carol (Lewisham, S.)
Probert, Arthur


Dempsey, James
Jones, Dan (Burnley)
Pursey, Cmdr. Harry


Diamond, John
Jones, Elwyn (West Ham, S.)
Randall, Harry


Dodds, Norman
Kenyon, Clifford
Reynolds, G. W.


Donnelly, Desmond
Key, Rt. Hon. C. W.
Roberts, Goronwy (Caernarvon)


Ede, Rt. Hon. C.
King, Dr. Horace
Robertson, John (Paisley)


Edwards, Waiter (Stepney)
Lawson, George
Robinson, Kenneth (St. Pancras, N.)


Fernyhough, E.
Ledger, Ron
Ross, William


Fletcher, Eric
Lee, Frederick (Newton)
Royle, Charles (Salford, West)


Foot, Dingle (Ipswich)
Lee, Miss Jennie (Cannock)
Shinwell, Rt. Hon. E.


Forman, J. C.
Lewis, Arthur (West Ham, N.)
Silverman, Julius (Aston)


Fraser, Thomas (Hamilton)
Lubbock, Eric
Silverman, Sydney (Nelson)


Galpern, Sir Myer
Mahon, Or. J. Dickson
Skeffington, Arthur


George,LadyMeganLioyd(Crmthn)
MacColl, James
Small, William


Gooch, E. G.
McInnes, James
Soskice, Rt. Hon. Sir Frank







Steele, Thomas
Wade, Donald
Wilson, Rt. Hon. Harold (Huyton)


Stewart, Michael (Fulham)
Warbey, William
Woof, Robert


Stonehouse, John
Wells, William (Walsall, N.)
Wyatt, Woodrow


Strauss, Rt. Hn. G. R. (Vauxhall)
White, Mrs. Eirene
Yates, Victor (Ladywood)


Swingler, Stephen
Wilkins, W. A.
Zilliacus, K.


Thomas, George (Cardiff, W.)
Willey, Frederick



Thompson, Dr. Alan (Dunfermline)
Williams. D. J. (Neath)
TELLERS FOR THE NOES:


Thorpe, Jeremy
Williams, W. T. (Warrington)
Mr. McCann and Mr. Redhead.


Tomney, Frank
Willis, E. G. (Edinburgh, E.)

Question proposed, That the Clause stand part of the Bill.

Mr. Norman Pannell: I speak briefly to the Clause because, in past years, I have strongly urged that concessions should be made for the smaller estates. Although I welcome the concessions made in this Clause, I do not think that they go far enough. Particularly do I welcome the exemption of estates up to £5,000. That is a matter of simple justice. I did not support the last Amendment because I felt that to give exemption to estates up to £10,000 would give disproportionate relief to. them and, in view of the cost involved, would limit the opportunity of making concessions in other directions which I have in mind.
What I feel is particularly anomalous is the comparatively high rate of duty charged on estates between £8,000 and £17,500. In effect, the Clause affects only estates up to £8,000—

The Temporary Chairman: Order. The hon. Gentleman is getting away from the Question, "That the Clause stand part of the Bill".

Mr. Pannell: In supporting the Clause, am I permitted to urge the Chancellor of the Exchequer to make concessions concerning estates in the higher ranges?

The Temporary Chairman: That is exactly what I told the hon. Gentleman he should not do.

Mr. Pannell: Then that limits my speech rather more than I had expected, Sir Herbert. If I am not allowed even to express the hope that my right hon. Friend will take account of the next stages next year, I can say nothing further.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 50.—(GIFTS IN CONSIDERATION OF MARRIAGE.)

Question proposed, That the Clause stand part of the Bill.

Mr. Houghton: This is the moment to ask the Treasury Minister to tell us a little more about this Clause. It was referred to by the Chancellor of the Exchequer in his Budget speech, and it was referred to briefly by the Financial Secretary in his Second Reading speech. I think that the Committee would like to know a little more about these queer goings on in the world of wealth and affluence.
It looks as though it has been possible for a father, on the marriage of his daughter, not only to make a gift inter vivos to her on the occasion of her marriage, but to distribute gifts all round the family. If, unfortunately, he died within the five-year limit, not only was the gift to the daughter exempted from Estate Duty, but the gifts to the rest of the family were similarly exempted. Perhaps the Financial Secretary will tell us how much he knows about this matter.
We know that there was a judgment of the courts which, no doubt prompted the Chancellor of the Exchequer to introduce the Clause before this method of tax avoidance went any further. Perhaps the case which was the subject of the proceedings was the only case known to the Inland Revenue where this happened, or, at least, where exemption was claimed and granted. It might conceivably be that this practice had been followed in other cases, but that when it was claimed that these gifts inter vivos should be exempted from Estate Duty and the Revenue refused exemption the matter was not further pressed, in which case there would be no loss to the Revenue.
The Clause defines not the state of marriage, but what the Chancellor of the Exchequer and the Financial Secretary have called "the marriage consideration". It seems that the Clause will limit the exemption of gifts inter vivos in the circumstances which I have described where the gift is given to
the parties to the marriage, issue of the marriage, or a wife or husband of any such issue".


That is going rather wide. There is provision for
a subsequent wife or husband of a party to the marriage or any issue of a subsequent marriage of either parry".
That takes the matter further. It is not only in consideration of the first marriage, but it can be in consideration of the second, and not only in consideration of the first marriage, but in consideration of the issue of the second. It is not only in consideration of the issue of the marriage. It can be a wife or husband of the issue of the marriage. In fact, it can be Uncle Tom Cobley and all.
The only thing which the Clause stops is the distribution of gifts by a generous parent to brothers and sisters, aunts and uncles and all sorts of other people who are not getting married at that moment so that there is no marriage consideration. What other consideration there may be is irrelevant. One has to get married in order to be part of the marriage consideration under the Clause. Previously, one had not. A gift could be made on a marriage consideration to a relative who had already declared that under no circumstances would he get married. How ridiculous can things become before the law is altered to make sense of this sort of arrangement?
Incidentally, I have omitted to say that not only the marriage consideration of those getting married, the issue of those getting married, the wife or husband of the issue of those getting married, but persons legitimated by marriage can apparently come within the scope of this exemption.
This raises the whole question of gifts inter vivos and the widespread avoidance of Estate Duty which people are enabled to practise. Although there is this limitation, if people have the prescience to make their dispositions when they are in reasonable health and vigour and can hope to live more than five years, they can dispose of very large sums to relatives, not only on the marriage consideration but on other considerations. too.
All that the Clause deals with is the estate caught by the time limit on gifts inter vivos and which provides the exemption of this kind of gift inter vivos, which is a gift on consideration of marriage which, as I said, is spread so widely

that it almost reaches the ends of the earth. It seems that a generous benefactor, on the occasion of the marriage of his daughter, could distribute gifts round the country and that they would all be regarded as gifts in consideration of marriage unless the law were changed. We welcome the change in the law, but whether it goes far enough is another matter.
6.30 p.m.
I know that those who advise rich people are very cynical about the willingness of rich people to dispose of their wealth for the purpose of avoiding Estate Duty. It seems that when one has money it gives power, but when one disposes of it one loses that power; one cannot keep one's relatives as affectionate as one would like them to be when one has given the money away to them while one is still alive. They may become indifferent towards one. They may sit on the "boodle" and lose their natural love and affection for their parents. It is said that tyrannous parents who are determined to have the love and affection of their family on the lowest mercenary grounds retain it by not doing anything which would enable them to avoid Estate Duty.
There are others. I have one case particularly in mind where, as a matter of principle and civic duty, people will not indulge in practices which lead to the avoidance of Estate Duty. They feel that the law is the law, their obligations are what they are, that it is their duty to fulfil them, and that they will not take any advantage. That is very noble of them in a wicked world of avoiders and evaders, scrimshankers and all the rest who are willing to rob the Exchequer hen roost on the slightest provocation.
This Clause is a puny thing. It looks as if it is shutting the door on perhaps only one case, though others may follow. I think that the Chancellor might have considered removing entirely the exemption in connection with gifts inter vivos on the marriage consideration. After all, why should there be any specal treatment of a gift inter vivos on the occasion of the marriage of one's son or daughter? What is there exceptional about that in modern conditions which make a special claim upon the sympathy of the Chancellor.
The days of marriage settlements are past, except in the small and exclusive


circle of those who have a corner in the national wealth. It is a very small number of people who have it. They are well enough off to manage without it. The gifts that are given to children on marriage should run the same risk as gifts to other members of the family. They are mostly marrying into money, not for money. They marry for love—but money with it—and I cannot shed any tears for people who may be caught by a Clause of this kind. Nothing that the Financial Secretary will say will wring the withers of my hon. and right hon. Friends.
I can only say that I pour the utmost scorn upon all the apparatus of avoidance in the matter of Estate Duty. The Chancellor is touching only one corner of it, one in which he should clearly do something, but I doubt whether the scandals of this case are any worse than many more which the Chancellor is not touching at all.

Mr. Eric Johnson: I do not pretend to have the knowledge of the hon. Member for Sowerby (Mr. Houghton) on these matters, but I have no quarrel with this Clause. I understand that its purpose is to withdraw exemption from Estate Duty from such far-reaching settlements as were possible under Section 59 of the Finance Act, 1910, but to retain exemption for settlements made to benefit only parties to a marriage and their children.
I should have thought that in these days, when adopted children are, in general, treated as equal with natural-born children, the marriage settlement which is drawn in such a way that the adopted children of the parties can benefit should not in itself be sufficient to make that settlement lose its exemption, as it seems to me it would, under the terms of the Clause.
I cannot believe that it is the intention of my right hon. Friend or the desire of the Committee, when we bear in mind all the legislation passed by Parliament in recent years to help adopted children and to see that they are no worse treated than natural-born children, that we should then turn round and make a settlement which excludes an adopted child from getting this exemption.
An Amendment was put down in the name of my hon. Friend the Member

for Portsmouth, Langstone (Mr. Stevens) and myself which was intended to remedy what seems to be a defect in the Clause. I hope that my right hon. Friend will look at it again and perhaps put right this apparently small defect at a later stage.

Mr. Graham Page: I have no objection to the definitions in subsection (1), but subsection (2) states:
A disposition made by either party to a marriage on or in contemplation of the marriage shall be treated for estate duty purposes as a gift.
Then there is a full stop.
I do not know whether it means as a gift in consideration of marriage or as a gift which is not in consideration of marriage. At present, as the law stands, marriage is a good consideration for the transfer of property if not valuable consideration. But the transfer of property on marriage or in contemplation of marriage is never a gift because there is consideration for it.
This Clause is a major alteration in the law, in saying something which any lawyer in the Committee at the moment learned in his student days—that marriage is good consideration. Now, in a subsection to this Clause, we are making a major alteration in the law; at least I think we are, but where the full stop comes leaves me in doubt. I do not know whether we are told that it is just a gift, or that it is not a gift. Is it a gift in consideration of marriage, or is it not a gift in consideration of marriage?
The importance, of course, is this: if we exclude settlements on marriage by either party to the marriage from being treated as a gift inter vivos which gets exemption, we are taking a very major step. We are telling the parties to a marriage, an engaged couple, one of whom may wish to settle property on the other, "You do not get any Estate Duty benefit out of doing it".
My second point I will not ask my hon. Friend to answer at once, because it is a rather technical one, but I want to put it on the record. Subsection (4) states:
This section shall not apply where the disposition was made before the 4th April, 1963.
Does disposition mean the instrument by which, for example, the settlement is


made, or does it mean perhaps the exercise of a power of appointment given by the settlement, or does it mean an event on which property passes under some terms of the settlement? It may be that the settlement was made before 4th April, 1963, but it gave power of appointment of some persons under the settlement. Does disposition mean the actual instrument which first created the settlement, or may it apply to the occasion on which property passes under the settlement?

Mr. Barber: To deal, first, with the points raised by my hon. Friend the Member for Crosby (Mr. Graham Page), he referred to subsection (2), which provides that a disposition made by a person on the occasion of his marriage shall be treated for estate duty purposes as a gift.
My hon. Friend is right in saying that this is a change in the law. It has not hitherto been thought to be the law, but in view of the House of Lords decision, to which the hon. Member for Sowerby (Mr. Houghton) referred, there is the danger that gifts to strangers made by a person in contemplation of his marriage would not be regarded as gifts within the meaning of the taxing provisions and would, consequently, escape duty on the person's death within five years of the date of the gift. The subsection eliminates this danger.
Gifts made on the donor's own marriage will, of course, depend for exemption on satisfying the terms of subsection (1).

Mr. Graham Page: Am I right, therefore, in understanding that a gift by one party to the marriage or contemplated marriage to the other party does not come within the subsection and that it is only if one party who is about to marry gives away property to a third party that it conies within the subsection?

Mr. J. T. Price: We should send for, the Attorney-General.

Mr. Barber: I am not sure whether I can give my hon. Friend an answer "off the cuff."

Mr. Price: On a point of order. May I suggest, Sir Robert, that when these fundamental questions are being submitted to the Treasury Bench we ought

to have the Attorney-General present to answer them? No Law Officer of the Crown is present.

The Deputy-Chairman (Sir Robert Grimston): That is not a point of order.

Mr. Barber: Having thus been given an opportunity to consider the matter, my hon. Friend will, I think, find if he looks at the wording that the case which he has in mind is brought within the scope of subsection (2) by the words of the subsection but then would be taken out again by subsection (1). [Laughter.] If I am right, my hon. Friend need not be particularly concerned on that score. I shall have to give my hon. Friend a rather dusty answer also to his other question. He asked the meaning of "disposition" for these purposes. I am not sure, but I think that somewhere in the Income Tax Acts it is defined. Perhaps I can write to my hon. Friend about it.
As the hon. Member for Sowerby said, the Clause is not concerned with the general rules about gifts inter vivos. It covers a narrow point and it simply closes a particular loophole in the Estate Duty law relating to gifts made in consideration of marriage, a loophole which was revealed by the House of Lords in the case of the Commissioners of Inland Revenue and Lord Rennell. The decision by the House of Lords was given on 13th March and, therefore, on this occasion, the Opposition will agree that we have acted swiftly.
At least, the general rule has always been that a gift inter vivos is liable to Estate Duty if the donor dies within a specified period—namely, five years—of making the gift. By Section 59 of the Finance (1909–10) Act, 1910, gifts which are made in consideration of marriage were exempted. The Clause covers gifts made otherwise than on the donor's own marriage, because dispositions made by a person in consideration of his own marriage were never treated as gifts within the meaning of the provisions imposing Estate Duty on gifts made within a fixed period before death.
Until the case came before the House of Lords, there was never any uncertainty about the sort of gift that the marriage exemption was intended to cover. It was an exemption which might broadly


be called wedding presents and for marriage settlements made on persons within the marriage consideration, as it is put —that is to say, the intended spouses and the issue of the marriage. As the hon. Member for Sowerby has pointed out, the decision opens a wide door to avoidance. According to the judgment of the House of Lords, a wealthy man on his deathbed has only to look round to find somebody about to be married. It need not necessarily be a member of his family, and it will bring tears to the hon. Member's eyes to know that he need not even be a friend.
All he has to do is to include that person in a discretionary trust otherwise consisting of his own children and the settlement will escape duty on his death even though, at the end of the day, little benefit might go outside the senior's family. The Clause undoes the effect of the House of Lords decision by restating the exemption in the shape in which it has always been applied.
6.45 p.m.
My hon. Friend the Member for Manchester, Blackley (Mr. E. Johnson) raised a point about the possible inclusion in subsection (3) of a reference to adopted children as well as persons legitimated by a marriage. As I understood it, my hon. Friend's suggestion would permit exemption where a settlement conferred benefits on a child who had been adopted by one of the parties to the marriage before the marriage which is the subject of the settlement. The trouble is that such a child is no more within the marriage consideration than a child of a former marriage of one of the parties to the marriage.
A child legitimated by a marriage is different in that he is a child of both the spouses and can, therefore, be reasonably treated as a child of the marriage. It has occurred to me—because although my hon. Friend's Amendment has not been called, I considered the matter after he had put it down—that there might be a case for including in the class of permitted beneficiaries a child who is adopted after the marriage. It would, of course, be somewhat unusual for a marriage settlement to include provision for such children, except, perhaps, when the parties to a marriage know or think that they will not be able to have children themselves and they intend to adopt children.
However, in this limited sense, it may be that my hon. Friend has raised a point of substance. We have gone a stage forward by referring in subsection (3) to persons who are legitimated. That is something which, the Scots would say, is outwith the House of Lords decision. We have done that which on social grounds is right. It may be that in the limited sense in which I have described it we could do something to meet the point raised by my hon. Friend. If we can, I am sure that it would be the wish of the Committee to do it.

Mr. J. T. Price: I fully understand that in the Clause the Government are seeking to stop one of the leaks which has been discovered in existing legislation. Whilst my hon. Friend the Member for Sowerby (Mr. Houghton) has poured righteous scorn in his own inimitable fashion, which we have all enjoyed, nevertheless for every hole which is stopped up may Allah be praised.
Every year when we come to these debates, we find that an elaborate, ingenious, nefarious device has been discovered which somebody in the Treasury recommends should no longer be permitted. When talking about Estate Duty, however, the biggest leak of all—and it is linked with the Clause—is an assumption on the part of all those who engage in these highly academic arguments of great finesse about inter vivos, covenants, and so on. What we always forget is that the very obligation upon a trustee or an executor of a will to give proper information to the Treasury is itself something which involves self-assessment.
There are many quite considerable estates where the original owner dies intestate and his next-of-kin have to go to the estate office to get letters of administration. Who is to discover all the history of these inter vivos gifts going back for five years? Ordinary householders and many businessmen do not keep proper books of accountancy. There are professional friends of mine in this Committee who wish that they kept proper books because they would probably get more work in their own professions if they did. But it is blithely assumed by the Treasury that if it stops up odds and ends of abuse it is dealing with the evasion of Estate Duty. It is not.

The Deputy-Chairman: Order. The hon. Gentleman is getting a little wide of the Clause. We cannot deal with general evasion or avoidance of Estate Duty under this Clause.

Mr. Price: I am obliged to you for reminding me, Sir Robert. I do not wish to go beyond the rules of order.
I am not so sophisticated as some of my colleagues. We are asked to agree to a Clause which does not stop some kind of Budget leak—[Laughter.] I am not saying that in any ulterior way, for I do not want to refer to past history. I will use the correct terminology and say that this is an attempt to stop an abuse in financial regulations, and I want to know what is being done to see that the main stream of our legislation is observed.

The Deputy-Chairman: Order. That is just what the hon. Gentleman cannot ask.

Mr. Price: I am obliged. I have finished what I have to say and I would like an answer to my question.

Mr. Mitchison: I congratulate the Government on what they have avoided. There were appalling prospects. This was a case in which three Law Lords decided one way and two the other. Out of the three, two gave reasons which were not entirely shared by the third. It is, therefore, one of those very clear cases in which every court will be bound by the reasons for the decision of the House of Lords, but will be in some difficulty in ascertaining precisely what those reasons were. That is what a Scottish judge once observed as an "infirmity of our judgment".
In this case, the most vivid illustration was given by Lord Radcliffe. It was a dissenting judgment, but it provided a nice description. Lord Radcliffe said:
There is no difficulty in stating what the deceased had achieved by this disposition. He had transferred a considerable fortune from his own resources to the ownership of the trustees selected by him to be held and applied by them for the benefit of his family in general, a phrase that includes all his children, all their descendants and their future husbands and wives; and the allocation of it between those persons or lines of descent was entirely at the mercy of the trustees, present or future.
The result is that people might be benefited who were descendants, however

remote, of the testator, and all this in consideration of marriage.
What brought me to my feet was a casual and rather frightening remark made by my hon. Friend the Member for Westhoughton (Mr. J. T. Price), who observed—and I do not know what promoted it in that particular connection "by Allah". This opens up appalling possibilities. There was a potentate in West Africa, called the Sultan of Foa, who had one hundred wives. He had to. Now, these emerging countries very often adopt the English law and revenue practice. I shudder, therefore, to think how much Estate Duty might have been avoided by the Sultan in consideration of even one of his numerous marriages.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 51 ordered to stand part of the Bill.

Clause 52.—(REDUCED DUTY ON CONVEYANCE OR TRANSFER ON SALE.)

Mr. Wade: I beg to move, in page 52, line 7, to leave out from "be" to end of subsection (1) and to insert "nil".
The effect of the Amendment is to abolish Stamp Duty on conveyances and transfers of sales. I welcome the Chancellor's proposal so far as it goes. Stamp Duty, which was raised to 2 per cent. in 1947, is being reduced by the Bill to I per cent., and it is also proposed that the ceiling of exemption of Stamp Duty on house purchase should be raised from £3,500 to £4,500. That is a step in the right direction.
In his Budget speech, the Chancellor gave his reasons for his proposal, and they might well apply to the case for abolition. He said, referring to the old, higher rate of duty:
It drives business, and, therefore, invisible earnings, from London. It is a strong disincentive to investment in Britain by people in other countries. It discourages investment in productive industry, not least by the small investor. It tends to raise the cost of issuing capital."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 488.]
This argument could well be deployed as a case for the abolition of Stamp Duty. There is a particularly strong case so far as transfers of stocks and shares are concerned. For the sake of simplicity


in drafting, I have not made a distinction between conveyances of property and transfers of stocks and shares, my main purpose being to draw attention to the Stamp Duty of transfers.
The only comment I make on the conveyancing of property is this: as I have said, I welcome the Chancellor's proposal as far as it goes but there has been a very great rise in the prices of houses, particularly in London and the South-East. Many people are now paying more than £4,500 for a house. Therefore, if the duty were not abolished I would be in favour of at least raising the exemption limit.
When one considers transfers, there are other factors to take into account. There is a tremendous number of transfers each year. A good deal of time is wasted over stamping of documents and it involves a certain amount of delay. There must be a considerable waste of manpower. It is also a very antiquated method of raising revenue. There is the observation by Professor Neumark, chairman of the Fiscal and Financial Committee of the E.E.C. reported in the Financial Times of 24th November, 1962. The report in the newspaper began:
Company officials concerned primarily with tax matters considered problems of tax harmonisation in the E.E.C. and the likely effect of harmonisation upon the British tax system…".
This was a report of a two-day conference on taxation and the Common Market, which was held in London.?
7.0 p.m.
Dealing with an investigation into the aspects of some particular taxes, Professor Neumark was reported as saying:
in some cases taxes which, though in terms of their relative share in the overall tax revenue seemed to be of minor importance only, might, because of their possible negative repercussions on economic transactions within a Common Market, need a close examination as to whether their harmonisation was useful or even necessary.
He referred to Stamp Duty and went on:
All, or nearly all, of these duties originated in times long past when, on the one hand, income and wealth, particularly the more mobile kinds of assets and the produce from them, were not yet taxed in an effective and adequate way by taxes on income and net value, and where, on the other hand, a general turnover tax was still unknown.
Even apart from the necessities of a Common Market these duties should, in my opinion, be abolished as fast as possible.

I am anxious that we should not be behind the Common Market in tax reform. I would rather see this country ahead of the Western European countries and that is a very strong argument for considering the case for the abolition of Stamp Duty on transfers.
The cost of collection must be considerable. I do not put that forward as a major argument, but it appears to me that the cost of collection in terms of a percentage of gross receipts must be going up. I have examined the figures in Appendix 7, Stamp Duty, on page 282 of the Report of Inland Revenue for the year ending 31st March, 1962. I do not propose to quote the figures, but I have calculated that the cost of collection expressed as a percentage of gross receipts has gone up by about 25 per cent. in the year 1961–62 as compared with 1960–61.
Presumably, if the duty is to be reduced from 2 per cent. to 1 per cent., the cost of collection as compared with the amount collected will go up considerably more than it did between 1961–62 and the previous tax year. Furthermore, there must be a fair amount of expenditure, certainly of time, by those who are responsible for the payment of Stamp Duty and go to the Stamp Duty office to pay it. That is a factor which must be taken into account.
As anyone who has given any thought to this subject knows, a good deal of time and ingenuity is expended in avoiding Stamp Duty. It has been said that it is not so much what one does as the way in which one does it that is taxed. I have with me an interesting brief from the Liberal Research Department which, at considerable length, sets out ways in which Stamp Duty can be avoided. [Laughter.] It is avoided, not evaded; it is perfectly legitimate.
I congratulate those who have prepared the document. They have given a great deal of care and trouble to it, but I do not propose to quote from it. I do not think that it is tile proper duty of Members of Parliament to advertise methods of avoiding duty, however legitimate they may be. But this is evidence of the complexity of this duty. One has only to study Clauses 53 to 58 and the Amendments which the Chancellor proposes to them, after consultations with the City, to recognise how complex it is.
A great deal of time is expended not so much in paying the duty as in finding ways of avoiding payment.
No doubt there will be reference to the cost of what I suggest.

Mr. F. P. Crowder: On a point of order. I am very interested in this document to which the hon. Member for Huddersfield, West (Mr. Wade) has referred. Am I right in saying that if, in a speech, an hon. Member refers the Committee to a document, the Committee is entitled to a sight of that document, be it in the Library or elsewhere, that there must be disclosure as in a court, where, if a document is referred to, it is exhibited? The hon. Member cannot have it both ways. The Committee must know what is in that document if he is to mention it.

The Deputy-Chairman: The rule applies only to State documents, not to private documents.

Mr. Wade: The hon. Member for Ruislip-Northwood (Mr. Crowder) made an ingenious point, but it has no substance.
No doubt we shall be told what would be the cost of abolishing Stamp Duty. It would be out of order for me to suggest alternative methods of raising taxation, or to put forward major tax reforms. My object is to bring to the Committee's attention the whole issue of this rather antequated Stamp Duty and to urge the Chancellor to adopt a more radical approach than merely reducing it.
What is the Chancellor's intention? Does he accept the necessity of this method of raising revenue? Has he any objection to it in principle? Is it the intention merely to reduce it from 2 per cent. to 1 per cent.—a reduction which I welcome as far as it goes—or is this a step towards the abolition and more radical reform, which I would certainly welcome?

Mr. Barber: As the hon. Member for Huddersfield, West (Mr. Wade) said, the purpose of his Amendment is to abolish Stamp Duty on conveyances and transfers instead of merely reducing it from 2 per cent. to I per cent., as proposed by my right hon. Friend. This was an objective to which the hon. Member

referred during Second Reading. Those of us on this side of the Committee, and clearly hon. Members of the Liberal Party, also, agree that the rate of 2 per cent. imposed by Lord Dalton is too high for these times. A 2 per cent. rate of duty is substantially higher than that of any other country in Europe or North America. As the hon. Member reminded us, my right hon. Friend has already told us that it tends to drive business, and, therefore, invisible earnings, from London.
The simple question raised by the hon. Member is how far we should go. It can hardly be for me to commit my right hon. Friend or anybody else to action which may be taken on future occasions. Here we are concerned only with the proposals this year. My right hon. Friend's proposals to reduce the rate of duty to 1 per cent. will cost £16 million in the current year and £25 million in a full year. If to that one adds the cost of reducing the duty on conveyancing property, other than stocks and shares, those figures are increased to £24 million and £36 million.
The hon. Member's proposal is attractive, but at least it can now be said that the transfer duty at 1 per cent. will no longer be seriously out of step with the corresponding duties in many other countires. In France, for example, there is a duty of 0·6 per cent. imposed on both buyer and seller in the case of shares for cash, which is 1·2 per cent. in all, and in West Germany the normal rate of duty on transfers is 0·25 per cent., but there is a special duty of 2·5 per cent. which is levied on the first issue of shares.
The reduction of Stamp Duty on the transfer of houses and land is, as the Committee will recognise, an important aspect of the Government's policy in encouraging home ownership. There is no point in reducing Stamp Duty on transfers if the houses are not being built for private owners to buy. I was a little surprised to hear the hon. and learned Member for Kettering (Mr. Mitchison) say on another Clause, an hour or two ago, that the Labour Government had done more for owner-occupiers than we have. One only has to consider the remarkably contrasting figures. In 1951, only 11½ per cent. of the houses built were for private owners. Last year, about 60 per cent.
were for private owners, which is quite an achievement.

Mr. Mitchison: I am not sure how far this is in order, Sir Robert, but I want to answer what has been put to me and no more. The hon. Gentleman, as usual, forgets the circumstances of the war. If he went back and looked at them he would find that there was a need in those days for rented houses which was even greater than it is now. What the Government have done is, no doubt, to increase the percentage of owner-occupied houses but only at the cost of depriving young married couples of the rented houses which they ought to have.

The Deputy-Chairman: The hon. Gentleman was entitled to introduce the illustration which he did, but I think that it has now gone far enough.

Mr. Barber: All I can say, Sir Robert, is that, naturally, I bow to your observation.
It is, at any rate, because of the general desire of all hon. Members in the Committee to encourage people to live in their own homes that on three occasions since we have been in office the Government have reduced Stamp Duty on conveyances at the bottom of the scale. Now my right hon. Friend is proposing again to raise the exemption limit and at the same time cut the general rate from 2 per cent. to 1 per cent. In future, no duty will be payable on houses costing up to £4,500, and on houses costing between £4,500 and £6,000 the duty will be only ½ per cent. As for the more expensive—

Mr. Mitchison: The hon. Gentleman is talking about houses. As two-thirds of the concession goes in favour of transactions in stocks and shares, would he say something about public benefits from that part of the reduction?

Mr. Barber: I thought that I had done so earlier. I started to quote what the Chancellor said in the Budget debate. I did not want to pursue that because I thought that hon. Members were familiar with what he said. But I certainly could not sum it up better than he put it. I wont on to explain that, certainly at the rate of 2 per cent., the transfer duty on stocks and shares was very significantly higher than in the case of most of our

competitors in Europe and also, I think, the United States and Canada.
I should have thought that it was certainly right, for all the economic and financial reasons which I should have thought would appeal to all hon. Members in the Committee, to try to bring ourselves more into line with our competitors in that way and also to make it easier for our industry to raise capital, which is, after all, a prerequisite of increasing growth—which, again, is something that we all want. If there is any particular point on transfer duty on stocks and shares, I should be happy to answer the hon. and learned Gentleman.
To complete what I was saying about the duty in respect of houses, for the more expensive houses, those over £6,000, the rate will be reduced to 1 per cent.
The Liberal Party wants to go further and help the purchasers of the more expensive houses, those costing more than £6,000 in particular, by abolishing the duty altogether. I must ask hon. Members in all seriousness whether they are really in favour of the complete abolition at this time of the duty on conveyances and transfers, bearing in mind the cost to which the hon. Member for Huddersfield, West very fairly referred. The cost of my right hon. Friend's proposals will be £36 million in a full year. Consequently the cost of the Liberal Party's proposals would be double that—more than £70 million a year—and I simply cannot believe that, in the !light of my right hon. Friend's proposal to halve the duty and the other major remissions of taxation which have been made this year, it would be right to do as the hon. Gentleman suggests and go further this year.
Therefore, I hope that the hon. Member will, on reflection, feel that this is not an occasion when he should press his Amendment to a Division.

Amendment negatived.

7.15 p.m.

Mr. Diamond: I beg to move, in page 52, line 31, at the beginning to insert:
subsection (6) of section 34 of the Finance Act 1958 (which imposes on the duty chargeable on a conveyance, transfer or letting to a charity an upper limit of 10s. for every £50 or fraction of £50 consideration) shall have effect with the substitution for the reference to 10s. of a reference to 5s.: but, save as aforesaid,".


The Amendment deals with a very simple point which I am sure the Government will be prepared to accept. So short is the point that I am not armed with a long research department's brief, as the Liberal spokesman was on how to avoid tax. Indeed, the research department at Transport House would not dream of getting out a brief of that kind. In Transport House circles everybody is very conscious of his union responsibilities, and every member leaves these matters to the union or professional association which is most suitably equipped to carry out the task.

The Chief Secretary to the Treasury and Paymaster-General (Mr. John Boyd-Carpenter): This has resolved a problem which has puzzled many of us—what the Liberal Party research department really spends its time doing.

Mr. Diamond: The Amendment needs very little argument, because it is plain on the surface what it seeks to do. The figures are very straightforward. The case before the Clause was introduced was that Stamp Duty on transfers and conveyances of the kind referred to—that is, the majority of them—was at the rate of £2 per cent. and it is now being reduced to £1 per cent.—that is. by half.
Equally, it was the case that when Stamp Duty was at the rate of £2 per tent. those transfers and conveyances Which took place to charities were at the rate of 1 per cent.—a half. All that the Amendment seeks to do is to maintain that differentiation, with slight benefit in favour of charities, of 50 per cent., thereby making the Stamp Duty for transfers to charities at the rate of ½ per cent. instead of the proposed 1 per cent.
The arithmetic is as straightforward as may be. The principle does not need arguing because it is one which has been accepted by the Government; it is implicit in existing legislation. Therefore, I believe that there can be no good reason for my detaining the Committee. I merely add that we hold very clear and strong views on this matter, and we hope and believe that the Government will share our view that the benefit in favour of charities ought to be maintained.

Mr. du Cann: The hon. Gentleman the Member for Gloucester (Mr. Diamond),

in pressing his Amendment, did not seek to argue that the Government's proposals in general to reduce Stamp Duty were bad and had something about them which adversely affected the position of charities. He argued simply that under existing legislation charities have a special position which he is anxious to preserve. I entirely understand that.
The purpose of the Amendments—because there is another one in Schedule 12 which is, no doubt, consequential upon this one—is to halve the rate of Stamp Duty chargeable on conveyances and transfers to charities, and in respect of premiums on leases to charities, that is to say, to reduce it from 1 per cent. to ½ per cent. The general intention of Part IV of the Bill is to restore the duties to their pre-1947 level. Thus, while the normal rate of duty on conveyances and transfers is to be reduced from 2 per cent. to 1 per cent., that on conveyances and transfers to charities remains unchanged at 1 per cent. Consequently, the discrimination in favour of charities, which has dated from 1947, disappears.
It may be helpful to point out—and I want merely to be helpful—that the Amendments contain two errors of drafting. The reference in subsection (6) to Section 34 is left in the air, in that that Section has been repealed. That is a minor technical point.

Mr. Mitchison: I do not understand that. There is no proposal here to introduce a new subsection (6). Perhaps the hon. Member will make his objections a little clearer. They are not clear at present.

Mr. du Cann: I am sorry if I did not explain them appropriately. There is a proposal to introduce a substantial amount of wording into the Clause. The reference to subsection (6) of Section 34 would be left in the air.
The second point is that while the Amendment halves the duty in respect of premiums in leases it appears to leave unchanged the duty charged in respect of rents under such leases, which since 1947 has also been half that charged on other leases. I take it that that was not what the hon. Member had in mind, but that he wished to reduce the duty both on premiums and on rents.
Those difficulties are not important. I merely point them out to be helpful.
The real difficulty is that these Amendments are open to objection on grounds of principle, for the Stamp Acts do not contain any general relief from Stamp Duty in respect of charities. Stamp Duties are taxes on documents, or on the transactions to which the documents give effect, and are measured by reference to the character and magnitude of the transactions, and not in general by the status of the persons concerned. This principle is well illustrated by the relief for small transactions in property other than stocks and marketable securities, for the relief depends solely on the nature and size of the transaction, and takes no account of whether the person who will bear the duty is rich or poor.
A direct tax like Income Tax can look at the ability of the person to pay, but Stamp Duties are like Customs and Excise duties and Purchase Tax, in looking at the thing rather than the person and charging a common rate of tax regardless of the circumstances of the person who will ultimately bear the burden of the tax. That is the principle of the matter.
On the other hand, if the hon. Member should say—as I feel he is likely to say, because it was implicit in everything he said in moving the Amendment—that principle is one thing and heart is another, I want to go on to talk about matters of the heart. There is no question but that charities derive substantial benefit in other ways, even if they do not obtain it, or are not likely to obtain it, from the Bill.
In respect of Income Tax—which I have already suggested is the proper medium for graduation—charities are already most generously treated, since they enjoy complete exemption. I only wish that many others of us might say the same thing. Secondly, they are also exempt from local rates, to the extent of 50 per cent.

Mr. Mitchison: Is the Clause concerned with local rates?

Mr. du Cann: It is not, but it is fair to argue, in reply to the powerful case advanced by the hon. Member, that our tax laws already contain substantial benefits in favour of charities, and the relief proposed in respect of Stamp Duty would be very small by comparison with the reliefs which charities already enjoy.
I want to explain why charities were put in a specially favoured position under the 1947 Act. A good deal had happened in 1947, which leads one to suppose that the circumstances at that time were wholly exceptional. Charities then complained that their expenses had risen steeply at the same time that their investment income had dropped. They also complained—and I make no political point about it; I am concerned only to retail the facts—that they had suffered severely as a result of nationalisation. They complained, further, that their benefactors had been discouraged by the legislation of 1946, under which payments under deeds of covenant were no longer allowable for Surtax—a point which was extremely strongly put.
Lastly, they complained that some charities—and we must remember that this was not long after the war—had had their premises requisitioned or compulsorily acquired, and had had to find other accommodation, which had made added difficulties for them. I am arguing that the circumstances which put charities into a special position in 1947 do not now apply as they did then.
An added benefit has taken place since then. The Committee will be aware that we have recently passed the Trustee Investment Act, which has extended substantially the powers of charities to invest. This is no doubt a matter which has been of some benefit to them and is likely to benefit them increasingly as time goes on. They pressed hard for this concession.
To sum up: it is true that the cost of the relief would probably be small. It is impossible to estimate it exactly. If I could give the hon. Member a figure I would do so. It is not likely to be great. But I suggest that the types of reasons why charities were put into a favoured position in 1947 do not now apply to the same extent. All that is happening in this legislation is that duties in general are being reduced, and that the privileged position of charities is disappearing. It is sad that discrimination should go, but l do not imagine that the charities themselves would feel envious—for envy is not a charitable thing to express.
I am sure that charities will agree that it is right to reduce Stamp Duties in general, and that they would be happy


if the duties were reduced further. Nobody would disagree with them about that. But for the reasons that I have expressed, although I have some sympathy with the case advanced by the hon. Member, it is not possible to bow to it and to accept the Amendment.

7.30 p.m.

Mr. Diamond: I know from past experience that if anybody on the Government side can make a good case out of nothing it is the Economic Secretary. His arguments are always marshalled with cogency and courtesy, and are always put over with a smile. We know that when a case as poor and as feeble as that which we have just listened to comes from him there is no answer to the Amendment that we are pressing, and which we shall continue to press.
The Economic Secretary began by referring to two minor, very technical defects in the drafting of the Amendment. We were grateful to him for that and had he left the matter there we would have been quite happy to see what we could do to make the necessary adjustments on Report—and then the will of the Committee could have prevailed. Instead the hon. Gentleman went on to try to argue that the Amendment should not be accepted. "Look how well charities are being treated," he said, "in terms of Income Tax benefits, rating, and so on". He followed that by saying that it was not right that charities should be

well treated. It was right in 1947, but it is not right today, he tried to make out.

The hon. Gentleman cannot have it both ways. There is a simple situation here. We are not seeking, and I did not attempt to seek when moving the Amendment, to prove the case for it. That case has been accepted by the House of Commons since 1947 and for sixteen years charities have enjoyed preferential treatment for Stamp Duty and have generally been in a privileged position on most aspects of local and national taxation.

The Government's refusal to accept the Amendment is singling out charities for unsatisfactory treatment and my hon. Friends and I are not convinced that there is the slightest argument in support of that refusal. There is no argument on cost, for the Economic Secretary agreed that the cost was likely to be negligible. There is no argument on the grounds of the lack of administrative machinery, for that machinery already exists. The Stock Exchange works quite happily and differentiates between transfers when charities are involved. Charities have had this and other advantages for many years. We insist that there should be a similar and continuing advantage in this respect—an advantage which charities have enjoyed for sixteen years—and we shall put our views to the test.

Question put, That those words be there inserted:—

The Committee divided: Ayes 112, Noes 163.

Division No. 123.]
AYES
[7.32.p.m.


Albu, Austen
Edwards, Walter (Stepney)
Jenkins, Roy (Stechford)


Allaun, Frank (Salford, E.)
Fernyhough, E.
Johnson, Carol (Lewisham, S.)


Allen, Scholefield (Crewe)
Fletcher, Eric
Jones, Elwyn (West Ham, S.)


Bence, Cyril
Foot, Dingle (Ipswich)
Kenyon, Clifford


Bennett, J. (Glasgow, Bridgeton)
Forman, J. C.
Key, Rt. Hon. C. W.


Benson, Sir George
Fraser, Thomas (Hamilton)
King, Dr. Horace


Blackburn, F.
Gordon Walker, Rt. Hon. P. C,
Lawson, George


Bowden, Rt. Hn. H. W, (Leics, S. W.)
Griffiths, Rt. Hon. James (Llanelly)
Ledger, Ron


Boyden, James
Grimond, Rt. Hon. J.
Lee, Miss Jennie (Cannock)


Bray, Dr. Jeremy
Hale, Leslie (Oldham, W.)
Lewis, Arthur (West Ham, N.)


Brown, Rt. Hon. George (Belper)
Hamilton, William (West Fife)
Lubbock, Eric


Callaghan, James
Hannan, William
Mabon, Dr. J. Dickson


Carmichael, Neil
Harper, Joseph
McInnes, James


Castle, Mrs. Barbara
Hayman, F. H.
McKay, John (Wallsend)


Chapman, Donald
Henderson,Rt.Hn.Arthur(RwlyRegis)
McLeavy, Frank


Collick, Percy
Herbison, Miss Margaret
Mallalieu, J.P.W.(Huddersfield, E.)


Corbet, Mrs. Freda
Hilton, A. V.
Manuel, Archie


Cronin, John
Holman, Percy
Marsh, Richard


Crosland, Anthony
Houghton, Douglas
Mayhew, Christopher


Crossman, R. H. S.
Hughes, Emrys (S. Ayrshire)
Millan, Bruce


Dalyell, Tam
Hughes, Hector (Aberdeen, N.)
Mitchison, G. R.


Darling, George
Hunter, A. E.
Morris, John


Diamond, John
Irvine, A. J. (Edge Hill)
Moyle, Arthur


Ede, Rt. Hon. C.
Irving, Sydney (Dartford)
Neal, Harold


Dodds, Norman
Janner, Sir Barnett
Oram, A. E.


Donnelly, Desmond
Jeger, George
Pannell, Charles (Leeds, W.)




Parker, John
Royle, Charles (Salford, West)
Thompson, Dr. Alan (Dunfermline)


Prentice, R. E.
Shinwell, Rt. Hon. E.
Thorpe, Jeremy


Price, J. T. (Westhoughton)
Silverman, Sydney (Nelson)
Tomney, Frank


Pursey, Cmdr. Harry
Skeffington, Arthur
Wade, Donald


Randall, Harry
Small, William
Warbey, William


Rankin, John
Soskice, Rt. Hon. Sir Frank
Wells, William (Walsall, N.)


Redhead, E. C.
Steele, Thomas
Williams, D. J. (Heath)


Reynolds, G. W.
Stewart, Michael (Fulham)
Williams, W. T. (Warrington)


Roberts, Goronwy (Caernarvon)
Stonehouse, John
Willis, E. G. (Edinburgh, E.)


Robertson, John (Paisley)
Swingler, Stephen
Zilliacus, K.


Robinson, Kenneth (St. Pancras, N.)
Taverne, D.



Ross, William
Thomas, George (Cardiff, W.)
TELLERS FOR THE AYES:




Mr. McCann and Mr. Grey




NOES


Allason, James
Fraser, Ian (Plymouth, Sutton)
Page, John (Harrow, West)


Arbuthnot, John
Gammans, Lady
Pearson, Frank (Clitheroe)


Atkins, Humphrey
Gardner, Edward
Percival, Ian


Awdry, Daniel (Chippenham)
Glyn, Sir Richard (Dorset, N.)
Pickthorn, Sir Kenneth


Balniel, Lord
Goodhew, Victor
Powell, Rt. Hon. J. Enoch


Barber, Anthony
Gresham Cooke, R.
Price, David (Eastleigh)


Batsford, Brian
Grosvenor, Lt.-Col. R. G.
Prior, J. M. L.


Baxter, Sir Beverley (Southgate)
Gurden, Harold
Pym, Francis


Bell, Ronald
Hall, John (Wycombe)
Rawlinson, Sir Peter


Bennett, Dr. Reginald (Cos &amp; Fhm)
Hamilton, Michael (Wellingborough)
Redmayne, Rt. Hon. Martin


Berkeley, Humphry
Harris, Reader (Heston)
Rees, Hugh


Biffen, John
Harrison, Brian (Maldon)
Renton, Rt. Hon. David


Bingham, R. M.
Harrison, Col. Sir Harwood (Eye)
Ridley, Hon. Nicholas


Birch, Rt. Hon. Nigel
Harvey, John (Walthamstow, E.)
Ridsdale, Julian


Bishop, F. P.
Hastings, Stephen
Robson Brown, Sir William


Black, Sir Cyril
Hiley, Joseph
Roots, William


Bourne-Arton, A.
Holland, Philip
Russell, Ronald


Boyd-Carpenter, Rt. Hon. John
Hope, Rt. Hon. Lord John
Sharples, Richard


Boyle, Rt. Hon. Sir Edward
Hornby, R, P.
Shaw, M.


Braine, Bernard
Hornsby-Smith, Rt. Hon. Dame P.
Skeet, T. H. H.


Brewis, John
Hughes Hallett, Vice-Admiral John
Smith, Dudley (Br'ntf'd &amp; Chiswick)


Brooman-White, R.
Hughes.Young, Michael
Smyth, Rt. Hon. Brig. Sir John


Brown, Alan (Tottenham)
Hutchison, Michael Clark
Spearman, Sir Alexander


Buck, Antony
James, David
Stevens, Geoffrey


Bulius, Wing Commander Eric
Jenkins, Robert (Dulwich)
Steward, Harold (Stockport, S.)


Burden, F. A.
Johnson, Dr. Donald (Carlisle)
Studholme, Sir Henry


Campbell, Gordon (Moray &amp; Nairn)
Johnson, Eric (Blackley)
Tapsell, Peter


Carr, Compton (Barons Court)
Johnson Smith, Geoffrey
Taylor, Frank (M'ch'st'r,Moss Side)


Chichester-Clark, R.
Jones, Arthur (Northants, S.)
Teeling, Sir William


Clark, Henry (Antrim, N.)
Kerr, Sir Hamilton
Thatcher, Mrs. Margaret


Clark, William (Nottingham S.)
Kirk, Peter
Thompson, Sir Richard (Croydon, S.)


Cleaver, Leonard
Lancaster, Col. C. G.
Thornton-Kemsley, Sir Colin


Cooper, A. E.
Langford-Holt, Sir John
Touche, Rt. Hon. Sir Gordon


Cooper-Key, Sir Neill
Leavey, J. A.
Turton, Rt. Hon. R. H.


Cordeaux, Lt.-Col. J. K.
Leburn, Arthur
Tweedsmuir, Lady


Cordle, John
Linstead, Sir Hugh
van Straubenzee, W. R.


Corfield, F. V.
Longden, Gilbert
Vane, W. M. F.


Coulson, Michael
Loveya, Walter H.
Wakefield, Sir Wavell


Craddock, Sir Beresford (Speithorne)
Lucas, Sir Jocelyn
Walder, sir Wavell


Crawley, Aidan
Lucas-Tooth, Sir Hugh
Walker, David


Critchley, Julian
MacArthur, Ian
Walker, Peter


Crowder, F. P.
McLaren, Martin
Walker-Smith, Fit. Hon. Sir Derek


Curran, Charles
Maclean,SirFitzroy(Bute&amp;N.Ayrs)
Ward, Dame Irene


Currie, G. B. H.
MacLeod, John (Ross &amp; Cromarty)
Whitelaw, William


d'Avigdor-Goldsmid, Sir Henry
McMaster, Stanley R.
Williams, Dudley (Exeter)


Digby, Simon Wingfield
Marshall, Douglas
Williams, Paul (Sunderland, S.)


Doughty, Charles
Marten, Neil
Wilson, Geoffrey (Truro)


du Cann, Edward
Matthews, Gordon Meriden)
Wise, A. R.


Duncan, Sir James
Mawby, Ray
Wolrige-Gordon, Patrick


Elliot, Capt. Walter (Carshalton)
Maxwell-Hyslop, R. J.
Woodhouse, C. M.


Emery, Peter
Mills, Stratton
Woollam, John


Emmet, Hon. Mrs. Evelyn
Mlscampbeil, Norman
Worsley, Marcus


Errington, Sir Eric
Montgomery, Fergus



Farr, John
Morgan, William
TELLERS FOR THE NOES:


Finlay, Graeme
Morrison, John
Mr. J. E. B. Hill and Mr. Peel.


Fletcher-Cooke, Charles
Nabarro, Sir Gerald

Question proposed, That the Clause stand part of the Bill.

Mr. Anthony Crosland: I should like to make a few brief remarks, not on the whole of this Clause, but only on that part of it which halves the Stamp Duty on Stock Exchange transactions. We

on this side of the Committee do not oppose the part which deals with house property transfer, or those parts related to the Ninth Schedule which deal with small investments, but that part of the Clause which reduces Stamp Duty from 2 per cent. to 1 per cent. on the bulk of ordinary Stock Exchange transactions.
Those who heard my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) addressing the Committee on Clause 43 will agree that his return from Washington has served both to lower the political temperature of our debates and substantially to raise their intellectual level. I do not wish to fall below the high standard he sets, so I say at once that this Clause is an indefensible sop to the property-owning supporters of the Conservative Party. But the serious difference between Clause 43 and this Clause is that, whereas my hon. Friend was voicing merely a suspicion of a Clause which involved only quite small amounts of money, in this case we are voicing a certainty about a Clause in which large sums of money are involved.
The Chancellor, rightly or wrongly, used to be described as a Tory progressive, one of the group of young Butlerites alleged to be on the Left-wing of the party opposite. If this is true, I am very surprised that he has chosen to put this Clause into the Bill. In doing so, whether or not he has been faithful to ordinary Tory principle, I do not know, but he has certainly been unfaithful to the principles of Tory democracy.
One of the things which the Chancellor may have forgotten is that the first Chancellor to suggest a Stamp Duty of any kind on shares was Lord Randolph Churchill in the famous Budget which he prepared for 1878–79 but never introduced because he resigned between preparing the Budget and the date of its presentation. He could, therefore, be said to be partly responsible for the fact that we have a Stamp Duty on anything connected with securities. Perhaps it is not surprising that the present Chancellor did not attempt to do what Lord Randolph Churchill did, because his biographer, the right hon. Member for Woodford (Sir W. Churchill), had this to say of him:
He laboured to transfer the burdens, so far as possible, from comforts to luxuries and from necessities to pleasures. He applied much more closely than his predecessors that fundamental principle of democratic finance—the adjusting of taxation to the citizen's ability to pay.
That is a principle which finds little expression in the Clause we are discussing.

7.45 p.m.

Mr. Emrys Hughes: Is it not true that Lord Randolph Churchill took up a much stronger attitude on the war Estimates and resigned rather than agree to them?

Mr. Crosland: That was a very good precedent which my hon. Friend the Member for South Ayrshire (Mr. Emrys Hughes) consistently follows. It was an objection to Navy Estimates which caused Lord Randolph Churchill to resign.
I should like briefly to consider the reasons given by the Chancellor for his actions in this case. They were given in the Budget debate, as reported at column 492 of the OFFICIAL REPORT,and have already been quoted by the spokesman of the Liberal Party, who characteristically not only approved of the Clause but wanted to give double the amount of money to this class. That is a rather curious reflection on the Liberal principles. They are certainly not radical Liberal principles.
The Chancellor, in his Budget speech, stated as his first argument for this concession, what also was quoted by the hon. Member for Huddersfield, West (Mr. Wade), that the 2 per cent. rate of duty was substantially higher than that in any other country in Europe or in North America. It is certainly true that it was higher here than in those countries, but the whole point is that, unlike most of those countries, we have no capital gains tax. To consider Stamp Duty in isolation, without considering the question of a capital gains tax, is to get the whole matter out of perspective.
The justification for the 1947 increase from 1 per cent. to 2 per cent. was that we in this country, unlike many other countries, did not have a tax on capital gains. At that time, Mr. Dalton, who doubled the Stamp Duty rate, decided against the capital gains tax, rightly or wrongly, on the ground that the Inland Revenue was extremely understaffed so soon after the war and would not be able to cope with it. Therefore, this was a partial substitute for a capital gains tax because, obviously, it fell very largely on the same class of persons. To say that our Stamp Duty rate is higher than that of other countries when


they have and we do not have a capital gains tax is, therefore, to give a false impression.
The Clause will largely benefit the very class of property-owners who are extremely lightly treated by our tax system. We not only do not have a capital gains tax but we have no wealth tax, despite the suggestions of N.E.D,C., and we have a form of Estate Duty which, to put it mildly, is easily avoided. The taxation borne by the property-owning classes is exceptionally low relative to the taxation borne by the receiver of earned income. So I do not find anything very convincing in the Chancellor's first argument.
His second argument was even more curious. He said:
It discourages investment in productive industry."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 489.]
That is a most remarkable statement on which I hope the Economic Secretary will comment.
Does the Chancellor really believe that industrialists over the last decade or so have been unwilling to invest because of a 2 per cent. Stamp Duty, or that they have been willing to invest but could not obtain the finance because of a 2 per cent. Stamp Duty? In this Committee and outside there has been endless discussion on the fact that investment has not been higher, but among the 150 reasons I have heard and seen advanced I have never heard the suggestion that the 2 per cent. Stamp Duty is the reason. It is nonsensical to suppose that if one thinks of the investment position of the typical firm over the last few years. To put the matter in the light most favourable to the Government, until a year ago, at any rate, we have had a considerable increase in investment in this country. As a proportion of the national income, it has gone up from 16 per cent. to 19 per cent., and done so perfectly happily still with a 2 per cent. Stamp Duty. No one can advance the suggestion that investment has been kept low because of the present Stamp Duty.
I suppose that the Chancellor could have used an ingenious argument. The right hon. Gentleman could have said, in theory, that the fact of having a Stamp Duty which falls mainly on switching, on the transfer of existing securities,

increased the cost of transactions to the point where very much less switching occurred so that turnover was reduced. and that this had the effect, when new issues were made, of reducing the amount available for taking them up. To put the matter crudely, new issues would have to rely solely on new money and would not have access to the money derived from the sale of old securities.
That case would be purely theoretical. No one can say that investment in this country has been held back in the last ten years by the difficulty of placing new issues. That may or may not have been the case for a few years after the war, but it has certainly not been the case for many years past. Therefore, that argument, again, will not stand up to examination.
The Chancellor's next argument in his Budget statement was a throw-away reference to the small investor. But the 2 per cent. Stamp Duty has little indeed to do with the small investor, who will not be significantly affected by the halving of the rate. Small investors are dealt with quite separately in Schedule 9, but, quite apart from that, the small investor is not significantly concerned with a Stamp Duty that falls primarily on switching.
The small investor is not typically the person who, once he has moved into the Stock Exchange, is constantly buying and selling securities. In any event, if he is, he ought not to be. It may be right to encourage the small investor, but not to encourage the small investor who then imagines that he can make money by constantly dealing in securities. Ideally, one wants that person to be a stable investor.
It is certainly the case that far more than 90 per cent. of the switching that will be facilitated and cheapened by this reduction is not done, and would not be done in any circumstances, by the small investor. In other words, 90 per cent. of this concession will go to the large investor. I therefore do not think that this halving of the Stamp Duty can he treated as a serious concession to the small investor.
The Chancellor's last argument was concerned with the balance of payments. He said, and it has been repeated by the hon. Member for Huddersfield, West, that this will encourage people in other


countries to invest in Britain. His exact words were that the 2 per cent. Stamp Duty
…is a strong disincentive to investment in Britain by people in other countries."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 488.]
That seems to me to be an extremely dubious argument. I doubt whether the halving of the duty will make more than a marginal difference to investment from abroad, but, even conceding that it will, we had better start considering whether we want a great deal more portfolio investment in Great Britain.
Hon. Members on both sides of the Committee—with, perhaps, the exception of some of my hon. Friends—would certainly say that they wanted to encourage direct investment by American firms in British productive industry —that is, American firms setting up subsidiaries in Britain. All the evidence is that that tends to increase the efficiency of the existing British industry. Further, that kind of investment from abroad is stable investment, not volatile, and I personally welcome it. I have done so in the past and will continue to do so.
That is not what the Chancellor is talking about. He is talking about portfolio investment from, say, the United States of America or the Continent of Europe. It seems very doubtful whether we want to rely much more on this type of investment to strengthen our balance-of-payments position. Portfolio investment is inevitably volatile, and our balance of payments is already vulnerable enough to speculation without increasing that vulnerability. If every time Wall Street is in a bearish mood and London is in a bullish mood, these funds should come into the country and, in the reverse mood, the funds flow back to Wall Street, this will simply increase the kind of speculative movement on capital account that I should have thought every hon. Member would have wanted to avoid.
In any case, even if we did want much more portfolio investment, it cannot be maintained that we must reduce Stamp Duty in order to get it. We know from the Government's own figures in the Economic Report, published just before the Budget, that both in 1961 and 1962

we had a very large inflow of portfolio investment—very much greater than in the previous years—even with a 2 per cent. Stamp Duty. Again, therefore, it seems that that argument will not stand up to examination. First, we can show that we have already had a considerable increase in this investment even with a 2 per cent. Stamp Duty and, more seriously, we should not lean too heavily on this kind of investment.
Another reason is that we are always trying to improve our balance of payments by seeking to get the capital account right, so distracting attention from what should be the Government's No. 1 objective, and the objective of all of us, which is to get our current account right—to get the balance of exports and imports right. There is no simple way of getting out of balance of payment crises.
Therefore, while we welcome the reduction of the Duty on house transfers and the concessions to small investors which are given separately in Schedule 9, we are very strongly opposed to what is the major part of this Clause—the reduction of the 2 per cent. Stamp Duty on the transfer of securities It is that reduction that accounts for by far the greater part of the cost of the Clause, and £16 million in the first year and £25 million in a full year are going to that part of the public, excluding small investors, who invest on the Stock Exchange. They constitute, perhaps, 3 per cent. of the population—the wealthiest group in the country. There is no reason why they should be given this large concession. This is the most indefensible Clause in the Bill, and we should have the greatest pleasure in voting against it if it were confined to this one item.

Mr. Maurice Macmillan: I should like to take exactly the opposite line to that taken by the hon. Member for Grimsby (Mr. Crosland), particularly in reference to the small investor. I apologise for doing so at this stage. It is due to an error which, I understand, has been shared by other hon. Members, in putting down an Amendment to Clause 54 thinking that it would achieve my objective, which is to pursue here as well as outside the campaign to encourage and facilitate the ownership of ordinary shares by small savers and new investors.
I must, first, thank my right hon. Friends and hon. Friends on the Treasury Bench for going as far as they have in reducing the Stamp Duty on share -transfers by 1 per cent. I hope that they will not think me ungrateful in wishing that they could have gone the whole hog. My hon. Friend the Financial Secretary, in answer to a Parliamentary Question gave the cost of that, and quoted other figures this afternoon. It is a lot of money, but I think that it was an American Minister to the French Republic who, in 1797, said, "They can provide millions for defence but not one damn penny for the tribute." My right hon. Friend has gone a little further than that —to 1 per cent.—but I could have wished for more.
Even my right hon. Friend's priorities in giving tax concessions make it impossible for him now to give us more, perhaps he can give an assurance that, in future, he will first keep in mind a further reduction in, or the abolition of, Stamp Duty and, in addition, do something particularly for the small investor under Schedule 9, having regard to the fact that at the moment the level that he pays up to £100 is, on occasion, slightly above, rather than where I think it ought to be, slightly below that of the rate widely in force.
8.0 p.m.
Could my hon. Friend say anything this evening about how far it may be possible in future to treat the small saver and investor in a similar way to the smaller dealers in property? I think that this applies particularly to a person who is investing for the first time in industry, and especially perhaps to those investing collectively through investment clubs. From what knowledge I have of them, there would seem to be quite a number who invest through the Stock Exchange about £100 a month regularly, month after month.
The hon. Member for Grimsby appears to regard all people who wish to make profits on the Stock Exchange as rich. The Wider Share Ownership Council made a survey, under Dr. Mark Abrams —admittedly, it was a fairly small sample —and I should like to tell the hon. Member for Grimsby that three-quarters of the sample did own shares, including a large number who owned £500 worth or less. They expressed the attraction to

them of owning shares as capital gains, profits, making money or gambling. The hon. Gentleman may deplore that intention. But why take that high moral tone and allow it to the rich, but forbid to the poor? I take the slightly different point of view. I get upset when I walk down the street, as I did yesterday, and see "Investment Office" written up over a building, and find that it is, in fact, a betting shop.

Mr. Crosland: Would the hon. Gentleman and his council really encourage the investor with less than £500 capital, as opposed to investing in a unit trust or an investment trust, to do a great deal of switching from one share to another? If so, it is indefensible.

Mr. Macmillan: I would not suggest that it should he encouraged. The Wider Share Ownership Council makes clear that in its view it is very dangerous for anyone to invest in anything which may lose its value temporarily, unless the investor is prepared to leave his money in that investment sufficiently long to obviate the need to withdraw the money at a disadvantage.
But I do not see why the hon. Member for Grimsby must take such a strong moral line about the activities of the small investor. I am anxious that the small investor should have the same chance and freedom to invest his money where he likes and that the concessions which he obtains from taxation as a small investor—which I should be out of order were I to attempt to pursue further—should be the same wherever he may make his investment.
There is one other point which I should like to make and which I hope that I shall not be out of order in pursuing. It relates to the question of who, in fact, pays the Stamp Duty. By practice, but for no other reason, it is paid by the purchaser of the shares. I think that it might prove helpful were the practice to be changed and the Stamp Duty paid by the vendor. This would relieve from the burden of paying Stamp Duty the person investing for the first time, and it would, indeed, meet the point made by the hon. Member for Grimsby, because if the investor did not transfer he would not pay at all.
I believe that it is not a question on which it is possible to legislate, since the


Government, or the Treasury takes the view that it does not matter who pays it so long as the stamp is put on the document—

Mr. Callaghan: A typical Treasury attitude.

Mr. Macmillan: If we could have an assurance on some of these points, some hon. Members who have been anxious, almost for years now, to abolish Stamp Duty would be able to add to the gratitude we already feel for the hon. Gentleman and his hon. Friends a sense of hope for the future.

Mr. R. Gresham Cooke: I wish to support and to thank the Chancellor and other Treasury Ministers for what they have done to reduce the Stamp Duty. I consider it to be one of the wisest steps taken in the Bill. It seems to me that it must surely be in the interests of everyone to widen the pool of investment and the number of investors. If British industry is to grow it has, from time to time, to go to its own shareholders for more money and, also, it tries to attract new shareholders. Therefore, the wider the pool of investment and the greater the number of potential shareholders, the greater the amount of money which will be available for industry for expansion in the future. One of the disincentives—

Mr. J. T. Price: Is the hon. Member seriously suggesting that the mere transferring of a block of shares in a company is necessarily adding anything to the finances of the company? The increment gained, or the loss sustained in the transfer, does not reflect itself in the central finances of the company.

Mr. Gresham Cooke: I am saying that suppose a fairly small company has 2,000 investors, and another 500 come in and pay £50 or £100 each, the company will have 2,500 investors. That is widening the pool of investment and making it easier for the company to raise more money from its shareholders, as it has to do from time to time in order to expand.
I dislike the argument advanced by the hon. Member for Grimsby (Mr. Crosland) that this is helping only 3 per cent. of the nation. I think that that gives a totally false impression of the

investors of the country. The large investors today are the pension funds, the insurance funds, and all the pension societies run by industry and by trade unions, and so on. When one breaks that dawn among pension holders and insurance fund holders, one finds that far from 3 per cent. of the nation owning British industry, the figure is about 30 per cent.
I welcome the Clause. I think that it will have a further advantage, as was said by the Chancellor in his Budget speech. The Stock Exchange is the only one which suffered under the disability of a 2 per cent. Stamp Duty. That has kept foreign investors from our shores. Despite what hon. Members opposite say, we wish to attract foreign investors in portfolios. It makes our capital larger and more valuable to the Treasury, and our balance of payments larger. On that ground alone, I should have thought that we were well justified in reducing the Stamp Duty from 2 per cent. to I per cent.
Therefore, I do not agree with what has been said by hon. Members opposite. I believe that this is one of the best steps taken by the Government to make British industry more democratic even than it is today.

Mr. du Cann: We always expect an intellectual and an engaging speech from the hon. Member for Grimsby (Mr. Crosland) and we are never disappointed —at any rate, never in my experience. None the less, one should never give a left hand without giving a right hand, and I fault the hon. Gentleman's speech on several practical counts which I hope to specify.
The hon. Gentleman seemed to me to read into the speech of my right hon. Friend, and his Budget statement, inferences which were not there. He discussed at least one point which my right hon. Friend never made. He put up an argument on the subject of new issues and proceeded to demolish it to his own great satisfaction. I am bound to say that I agree with a great deal of what he said. But that was not one of the positive reasons why my right hon. Friend brought forward this proposal in the first place.

Mr. Crosland: It was a better reason.

Mr. du Cann: The hon. Gentleman says that it was a better reason than that advanced by my right hon. Friend. That is untypically modest of the hon. Gentleman, if I may say so.
The hon. Gentleman said a certain amount about the wealth tax. It amuses me to note that he cannot get to his feet without mentioning the wealth tax. He is very enamoured of this development. The hon. Member for Cardiff, South-East (Mr. Callaghan) the hon. Member for Gloucester (Mr. Diamond) and the hon. Member for Grimsby—this unholy trinity —all say to me with one voice, "Neddy". One passing reference to a wealth tax in the N.E.D.C. Report, to the effect that it may
have some relevance in the taxation of growth",
Is hardly. I should have thought, unqualified enthusiasm.
The N.E.D.C. may well have mentioned the wealth tax casually, but that is not necessarily a strong recommendation for it. There is a great deal of opposition to the idea of a wealth tax, a substantial body of opinion which feels that such a tax would be a substantial penalty on enterprise.
I am one of those who agree with that opinion. But the hon. Member did not say whether the Labour Party would put the rate of Stamp Ditty up again. I do not know whether they are shy in advance of a General Election, but it is surprising that we have no Amendment on the Notice Paper to alter the situation if he thought that that were an appropriate thing to do.
It was particularly noticeable that the hon. Gentleman did not quarrel with a number of points which my right hon. Friend made. One was the claim that the 2 per cent. level to which Stamp Duty was lifted in 1947 by the late Lord Dalton was substantially higher than that in any other European or North American country. That is a fact, and the reduction has brought us more into line. My hon. Friend the Member for Halifax (Mr. Maurice Macmillan) wants us to go still further, while being good enough to acknowledge that we have already gone some way.
It is worth quoting the other European rates. In France, it is 0·6 per cent. on both buyer and seller—a commentary on

the point made by my hon. Friend the Member for Halifax—making a total of 1·2 per cent. We are, therefore, cheaper than France. In Western Germany, it is ¼ per cent. In Belgium, it is 0·3 per cent. on both seller and buyer, making 0·6 per cent. In America and in Canada, there is a very small Federal tax. It is fair, therefore, to claim that we have come down very much nearer to the European and North American rates, though there is still undoubtedly some way to go. What has been entirely clear is that with that rate at 2 per cent. our stock market has been at a substantial disadvantage by comparison with others.
The hon. Member for Grimsby discussed at some length whether we wanted portfolio investment in the United Kingdom. I agree with him that this requires looking at with a great deal of care, for it is a two-edged matter. We all acknowledge that. I have no doubt about it, nor has anybody else who has considered these matters carefully. It may or may not be right to encourage portfolio investment in the United Kingdom.
The hon. Member said that overseas investment in productive industry was probably a good thing. Again, I agree, although I think that a limit should possibly be set to that—and I note that he agrees with me on that point. What we want is to see the markets of securities in London, and there is no doubt that this high level of Stamp Duty has been a great deterrent. In practice, that is a matter of fact, and there is no gainsaying it. There is no question that foreigners, on the whole, have been reluctant to deal in the United Kingdom market while the level of Stamp Duty has been as high as 2 per cent.
The hon. Member for Grimsby suggested, I do not think seriously, that it was perhaps my right hon. Friend's intention to put everything in our balance of payments right by this single stroke. That is not so. It is a marginal matter, it is true, but it seems to me to be important. I do not think that it is right to look at the Stamp Duty in isolation. I do not wish to trespass beyond the rules of order, but may I draw attention to a later Clause, which we shall discuss in full, which deals with the facilitation of bearer issues and also to a Measure to which the chairman of the Stock Exchange


referred at his annual meeting yesterday—the Stock Transfer Bill.
These measures and others are bound to have an effect in improving the market facilities in London, and I believe that to be highly desirable and appropriate. It is important to remember that the Stamp Duty reduction should not be considered in isolation.

Mr. J. T. Price: I was interested in the hon. Member's reference to the Stock Transfer Bill, which he is using to support his argument. It has not yet been considered by the House.

Mr. Gresham Cooke: It has had a Second Reading.

8.15 p.m.

Mr. Price: Only in the formal sense. It went to another place and comes back to Committee in this House next Wednesday. I am a member of the Standing Committee. If the hon. Member intends to quote this legislation in support of his argument, he should bear in mind that when it was considered in another place it was first considered as an administrative Measure to do away with much of the form filling and elaborate documentation which stockbrokers said were hampering them. It was only when it went into Committee in another place that noble Lords there strongly pressed the Government to abolish the Stamp Duty altogether and to put the cornerstone, as it were, on the Stock Transfer Bill. It is rather rich for him to argue this administrative Measure when the impelling force came from another place in the debate on 21st March, the OFFICIAL REPORT of which I have read.

Mr. Diamond: Does my hon. Friend mean rich in the singular or riches in the plural?

Mr. Price: I was speaking euphemistically. We usually regard the other place as a bit rich, in any case.

The Temporary Chairman (Mr. W. R. Williams): Order. I think that any reference to anything which is not in the Clause should be very sketchy indeed.

Mr. du Cann: You are entirely right, Mr. Williams. What I was anxious to do was to put the matter in its context.
The hon. Member is right that on Wednesday a number of us will no doubt

be upstairs discussing a Measure which, I think, you would prefer me not to mention again. That is surely a good and desirable thing. It is an administrative matter, but we must look at these matters in context, and it is a good thing that the market facilities are being improved.
The hon. Member for Grimsby and my hon. Friend the Member for Halifax referred to Schedule 9, in which the steps are improved. I gather that this was warmly welcomed by the hon. Member for Grimsby, and I think that he was entirely right to do so, for the previous scale was in my opinion totally unsatisfactory. I have argued against it in the House and in many other places in the past.
To take an extreme example to illustrate the point, on a purchase consideration of £25 ls. one could pay Stamp Duty almost at the rate of 4 per cent. This was intolerable. My hon. Friend the Member for Halifax says that these steps are much improved, but suggests that later we might look at them again and endeavour to find a less steep graduation, bearing in mind even that in the Schedule we have reduced the steepness of the steps. I am bound to tell him clearly that there are certain practical difficulties in the way of doing that. If we introduce too great a number of steps there are bound to be delays in the stamping process. It seemed to us that the proper thing was to devise a number of steps which mitigated the difficulties which I have illustrated by that extreme example and, at the same time, did not result in any delay in dealing with the stamping processes. That is the reason for our coping with the matter in that way.
The hon. Member for Grimsby spoke about large investors, and he represented to the Committee, I think, on the whole, mistakenly, that the reduction in duty would be largely a matter of benefit to large private investors. I do not believe that to be the case, and I should like to say a word about the growth of share ownership.
My hon. Friend the Member for Halifax is chairman of the Wider Share Ownership Council, of which my hon. Friend the Member for Twickenham (Mr. Gresham Cooke) is also a distinguished office holder. The Council has made a survey, admittedly, as my hon. Friend


said, on the basis of a fairly small sample, but which I believe to be accurate, which indicates that there must be about 3,500,000 shareholders in the United Kingdom. That is a very substantial number of individuals.
The chairman of the Stock Exchange, speaking in Liverpool a short time ago, and almost quoting an American Stock Exchange survey, said that he believed that at least another 500,000 people were on the threshold of investment. I imagine that that suggestion is correct. The Inland Revenue, in its 105th Report, dated January, 1963, stated that the number of ordinary shareholders alone rose by 130,000 between 1960 and 1961. The current rate of increase seems to be about 10,000 a month.

Mr. Callaghan: Persons or holdings?

Mr. du Cann: Persons.
There are believed to be 1,200 investment clubs in the United Kingdom, to which my hon. Friend has also referred. Nearly all the clubs are believed to have about 20 members. The growth of these clubs is a remarkable social phenomenon. The total annual investment comes to about £1 million, not an insubstantial sum when one reflects that probably five years ago there were certainly not 100 clubs in the United Kingdom and probably not even 20. In the unit trust field there are about 1 million investors, whereas five years ago, to my certain knowledge, there were not more than 250,000. These unit trusts are taking increasingly large sums on a regular basis in amounts of 10s. or 5s.
There may be a number of rich people who own shares. Some of them may have large holdings, but, nevertheless, the facts seem to show conclusively that there is a very strong trend towards wider share ownership. For instance, I.C.I. has about 410,000 ordinary shareholders, Shell has 275,000, and of the 32,000 ordinary shareholders in Rolls-Royce, 65 per cent. hold under 300 shares. Seventy per cent. of the 110,000 ordinary shareholders in B.M.C. hold 1,000 shares. There are about 100,000 ordinary shareholders in Woolworths, of whom 30 per cent. have holdings of less than £500 in value. These are individual personal shareholdings.
On the other hand—and my hon. Friend the Member for Twickenham

made the point though he did not mention the figure—about two out of three adults in the United Kingdom are indirect investors through subscriptions and contributions to institutional investors. Pension funds, large industrial companies and other organisations, insurance companies, and even the trade unions, which have started their own unit trust, friendly and charitable societies, and so on, hold about half of all the securities quoted on the Stock Exchange.
The hon. Member for Grimsby is right when he says that, in general, the benefit of this concession will go to the large investor. This is inevitable, but the fact that so many millions of our citizens are indirectly interested in these institutional investors illustrates that they should eventually get the advantage. It illustrates a further point. It seems to me, and I hope that the Committee will think it right, that the proportions of small holdings which I have quoted, bearing in mind the figures for institutional holdings, are even more striking than they appear at first sight.

Mr. J. T. Price: The hon. Gentleman is now taking refuge in generalities. While I fully understand the significance of all these institutional investors, nevertheless I prefer to see this proposition set out in the Committee in the form of figures. The only figures which the hon. Gentleman has quoted relate to investment clubs, of which there are large numbers. He says that they produce about £l million in investment each year, which is quite a substantial sum. But we should look at the cost of this concession of a 1 per cent. reduction in the duty. It is about £25 million and, therefore, this refers to a total investment of £2,500 million. In the light of that £2,500 million, which will attract this concession, I suggest that the small investors are a mere drop in the ocean and that the main benefit will clearly go to the large investors.

Mr. du Cann: With respect to the hon. Member, either he has not entirely followed my argument, or, alternatively, I have not made my remarks as clear as I should have liked them to have been. The hon. Member's interjection inevitably gives a misleading impression to the Committee of what I said. I said, "Look at the trend. It is remarkable and extraordinarily clear. It is one of the most


remarkable social phenomena of our time, particularly in relation to investment clubs. That movement may be small, but look at the totality of it."
My hon. Friend the Member for Halifax spoke about the future. He will not expect me to be specific about that tonight. It would be fair to say that there can be no reason in principle for not reducing or abolishing stamp duties excepting in so far as they are revenue producers and, taken at the level at which they endure, they are not an interference with the market. It is claimed that they have been. British securities, for example, are being treated in Paris at present because it is cheaper there than it has been in London. This is absurd.

Mr. Callaghan: Why not?

Mr. du Cann: While I am very much in favour of competition, I am not in favour of British institutions and traders being put at a competitive disadvantage for any reason. That is why I am glad to see this Stamp Duty reduced.
I said earlier, and not at any length, for reasons of order, that this Stamp Duty matter cannot be considered in isolation. I have laid emphasis on the need to create, maintain, develop and exploit the market in London. I am clear that the whole Committee would think that to be a desirable thing to do, but I think that it is right to say that the Government can do only so much and that the reduction of Stamp Duty, or the passage of the Bill which we shall be discussing shortly, are only a part of the whole scene.
There are practical people involved who have to do their part. There are companies which have a strong obligation, as The Times pointed out clearly today, to modernise their procedures. We have to examine every aspect of this matter. We have to make certain that the machinery of brokerage charges is at an appropriate level in comparison with what others charge.
Be that as it may, I am convinced that this reduction in the duty is thoroughly beneficial to the country as a whole. It must be if it gives London a better opportunity to fulfil its responsibilities. I believe that the capital markets in Europe and in America are

not a patch on London and that London has an unrivalled opportunity to become the financial capital of the world. We have superb facilities, which are being improved. There is outstanding knowledge and expertise in the City of London and I hope very much that those who are active in these fields in the City will not fail, in the national interest, to seize this opportunity with both hands.

8.30 p.m.

Mr. Callaghan: We have heard a very interesting speech from the Economic Secretary, a speech in which I caught echoes of previous speeches he has made from other parts of the House. He is very fortunate in being able to translate into practice from the Front Bench some of the things he has asked for when speaking on the back benches. Not all of us are so fortunate. Some of us have to watch hon. and right hon. Members opposite translating our views into practice, but the hon. Gentleman has had the opportunity of doing it with his own.
The hon. Gentleman has told us of the very great growth of shareholding, of the way shares are held, the pensions funds, the substantial increase in the number of I.C.I. shareholders, the 3½ million investors, and so on. He said that over the past few years—I quoted his words—the trend has been remarkable.
What is the need for the Clause? If we are getting this growth in shareholding, if it is so widely spread, if the trend is remarkable, why are we spending another £25 million in a full year? If the hon. Gentleman is looking about for reliefs, if he wants a way of spending £25 million, my hon. Friends can suggest plenty of ways of giving away another £25 million. Next week, he will be resisting Amendments asking for relief for the blind. He will be resisting Amendments asking for relief for the disabled. This Government can never find the money to give a car to a man disabled in industry. Yet, despite the remarkable trend and the growth in shareholding to which the hon. Gentleman points with a great deal of satisfaction—I do not dissent from that —he says that we must give away another £25 million in this fashion.
The hon. Gentleman's speech was really the most devastating argument against the Clause which I have heard. With due


deference to my hon. Friend the Member for Grimsby (Mr. Crosland), who made one of his usually attractive speeches—apart from a personal attack upon me—I thought that the Economic Secretary made an even more powerful case against the Clause than did my hon. Friend. There can be no justification for doing it if there is this remarkable trend in the growth of shareholding.
The simple truth—I come back to it, agreeing with what was said by my hon. Friend the Member for Grimsby—is that this is a gift to the City in election year in order to pacify Lord Ritchie and offer a sop to the Stock Exchange That is all it is. We know what it is for, and, incidentally, it is no less blatant for being concealed behind a number of specious arguments, however attractively presented.
I must join issue with the hon. Gentleman in what he says about the City of London. There is often a tendency to confuse the interests of the City of London with the interests of Britain. The two are not necessarily synonymous. When they are synonymous, I am in favour of the City of London performing its functions with the maximum efficiency and the maximum profit to the British balance of payments. But, in my view it is the balance of payments which counts, not the City of London. I have yet to be persuaded by all the arguments advanced by the hon. Gentleman and others who desire to make the City of London a very great financial capital again that this will bring about the long-term strengthening of the balance of payments. Yet it is only the strengthening of the balance of payments which matters. Neither the interests of the City nor the interests of anybody else matter apart from that.
My own view is that this country and sterling could very well be stronger. not weaker, if we had strong capital markets in other parts of Europe, if the German stock market were not so thin in stock as it is today, so that we did not have such fluctuations as occurred last week, and if the French Bourse had more stock to offer and more capital to hold. I do not share the view that, so long as sterling is as unprotected as it is today, it is our duty to attract and try to cope with more capital from other countries before we can secure protection for our own industry here.
The two things are not synonymous, and I beg the hon. Gentleman to think carefully before he, with the City, goes on attracting new capital to this country which can retreat as quickly as it comes. Certainly, this applies to portfolio investment and much more to short-term investment. One of the best things the hon. Gentleman could do would be to bend his very acute mind to getting an equalisation in short-term interest rates which would offset at least a certain amount of the fluctuations in the exchange.
We are really talking about a myth if we automatically believe in, and we all bow down to, as before the sacred calf, the interests of the City of London, imagining that they are necessarily the interests of the British balance of payments. The two can be in direct contradiction. This ought to be recognised and said clearly.
What I am saying is not an attack on the City of London, although, clearly, I cannot hope for many votes there. It is an attempt to put the matter in proportion. We ought always to keep it in proportion. There have been occasions during the 1950s when the interests of the City of London were diametrically opposed to the interests of British industry. So, unlike the hon. Gentleman, my thoughts turn in the other direction, in the direction of strengthening sterling and our balance of payments by taking some of the strain off sterling through building up the capital market in other parts of Europe. I believe that this would be more in our long-term interest because we do not have, and cannot have in the future, the domination of world trade which we had in the past.
The major point made by the hon. Member for Halifax (Mr. Maurice Macmillan) related to the small investor. The hon. Gentleman is a great expert in these matters, but I wonder whether his researches show how often the small investor switches. My hon. Friend the Member for Grimsby made this point. He is actively against encouraging small investors to switch, and so, I gather, is the hon. Member for Halifax. But surely the small investor—say, the widow with perhaps £1,500 or £2,000 split up among three or four investments —does not switch investments. The small investor leaves them where they are, sometimes for bad as well as good.
It is not these people who will get the advantage from this Clause. It is the investor who constantly hops in and out of I.C.I., out of equities into gilt-edged, from gilt-edged back into short-term loans, hopping around, making a quick dollar or a quick £, who will benefit from this Clause. That is why I thought the hon. Gentleman's case for the small investor was misconceived. Small investors will not get an advantage except on the occasion of the initial investment. Apart from that, I believe that they will do very little moving.

Mr. W. Clark: I am interested in what the hon. Gentleman says about this hopping in and out. With a capital gains tax, there is no hopping round, at least until after six months. If an investor makes a profit in he is caught by the captial gains tax. The hon. Gentleman must accept this.

Mr. Callaghan: I hope that the hon. Gentleman will not get into trouble with his Front Bench, because we do not have a capital gains tax. What we have is a speculative gains levy, or something like that. I was rebuked last year for calling it a capital gains tax. I think that the then Chancellor of the Exchequer was right in rebuking me. We have not a capital gains tax, and that is one of the criticisms. I am not sure that there is a case for a Stamp Duty if we have a proper capital gains tax.
I will make the hon. Gentleman an offer: would he like to swop his Stamp Duty for the capital gains tax? There is no case for the hon. Gentleman offering us comparisons
with the Stamp Duty rate in Belgium, because Belgium has a capital gains tax. That is the alternative. It is no use the hon. Gentleman talking about the United States, because there is no Stamp Duty in the United States, but there is a substantial capital gains tax.
I object, and have objected all the time, to our picking up—I know that we must do it for the purposes of this Commit. tee—these taxes in isolation and making individual comparisons with other countries, as though we are telling the whole story. My belief is that the whole tax system has a lot of fungus on it. It was designed by William Pitt to beat the French in 1798, and I am not sure whether it is suitable to beat President de

Gaulle in 1963. The whole tax system needs looking at—the wealth tax, capital gains tax, Stamp Duty. We may want to reduce some and increase others. Estate Duty is something that we want to look at.
The hon. Gentleman does not convince me, and I do not think that he convinces many other hon. Members, when he tells us what is the rate of Stamp Duty in Belgium, America, France and elsewhere without bringing into play the other forces and imposts that those who are purchasing shares in those countries have to bear. If this were to stand in isolation in the Clause, we would undoubtedly vote against it. But because it is in a miscellaneous group which will benefit the home owner and those purchasing houses, we would not want to vote against the Clause. But we express our opposition to what the Government are doing in this Clause, and on Report we will have an opportunity to single out and focus attention on this Clause and will be able to register our view on it.

Mr. McMaster: I do not wish to detain the Committee at this late hour, but I am prompted by the speech of the hon. Member for Cardiff, South-East (Mr. Callaghan) to add one point in what has been a very important debate. The £25 million which is involved here has been criticised as being a gift to the City and as not in the long-term interests of this country. I venture to suggest that there are two important points which have been entirely neglected.
I applaud the reduction in tax, but agree with my hon. Friend the Member for Halifax (Mr. Maurice Macmillan) that it would have been much better if this tax had disappeared entirely. Basically, it discourages investment. I cannot agree with what has been said from the benches opposite about transfers of shares not encouraging investment as a whole. It is because there is a free transfer of shares that the market is good and people are willing to invest. It is because people invest in this country that we have our present capital equipment.
It has often been said in debates in this Chamber that we lag behind our competitors abroad in the amount that we are prepared to invest. Every step that we take to encourage investment is a step for the long-term benefit of this country.
Another aspect of this is that is so far as the small saver invests and does not spend, he leaves a surplus of consumer goods to be exported. The point was made by hon. Members opposite that the Chancellor of the Exchequer should take steps aimed at improving our balance of payments. This is a step which must help to improve our balance of payments, because in so far as it encourages investment, it puts more pressure on exports.
Speaking as a Member for a Northern Ireland constitutency, I say that we must have more investment if we are to reduce the level of unemployment in areas of heavy unemployment. Therefore, I applaud this proposal, and I hope that some of the investment which results will be channelled to those areas where it is most needed.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 53 ordered to stand part of the Bill.

Schedule 9 agreed to.

Clauses 54 and 55 ordered to stand part of the Bill.

Clause 56.—(STAMP DUTY ON BEARER INSTRUMENTS.)

Mr. du Cann: I beg to move, in page 54. line 23, to leave out from beginning to the end of line 36 and to insert:

(1) Inland bearer instrument (other than deposit certificate for overseas stock).
Duty of an amount equal to three times the transfer duty.


(2) Overseas bearer instrument (other than deposit certificate for overseas stock or bearer instrument by usage).
Duty of an amount equal to twice the transfer duty.


(3) Instrument excepted from paragraph (I) or (2) of this heading.
Duty of 6d. for every £25 or part of £25 of the market value.


(4) Inland or overseas bearer instrument given in substitution for a like instrument duly stamped ad valorem (whether under this heading or not).
 Duty of 6d.

I think that it might be for the convenience of the Committee if we discussed with this Amendment a number of other Amendments, Mr. Williams.

The Temporary Chairman: Yes, it might be convenient to the Committee to discuss with this Amendment the next six Amendments in the name of the hon.
Member for Nottingham, South (Mr. W. Clark), and the Government Amendments, which deal with the same subject.

Mr. du Cann: I suggest, Mr. Williams, that among that splendid collection of Amendments, we might also discuss the Amendment in page 55, line 27.

The Temporary Chairman: Yes, I think that the more we have together the better we shall get along.

Mr. du Cann: I am sure that the Committee will be extremely grateful to you, Mr. Williams, for your kindness in suggesting that we should discuss all these Amendments together. They are a little complicated; indeed, this whole section of the Bill is a little complicated. I shall do my best to explain them concisely and clearly, and I hope that I shall satisfy the Committee in both those respects.
8.45 p.m.
I hope that I may be allowed to say a short word on the subject of the Clause, simply to put the Amendments into context. As the Committee knows, its chief purpose is to halve the current rates of duty on bearer instruments. Its second purpose is to base the duty, where appropriate, on market value rather than on nominal values. This is especially important in the case of no par value shares which have no nominal value and on which, therefore, there can be no duty. In so far as overseas no par value shares have been liable for United Kingdom duty —of course, there have been overseas no par value shares when such shares have been impossible in the United Kingdom —they have escaped duty altogether. The last purpose of the Clause is to consolidate and redefine the law.
My right hon. Friend the Chancellor of the Exchequer has seen fit to table a number of Amendments which I hope my hon. Friend the Member for Nottingham, South (Mr. W. Clark) and my hon. Friend the Member for Halifax (Mr. Maurice Macmillan) will feel entirely meet the spirit of what they were intending to achieve.
The Amendments reduce the duty on overseas bearer instruments by usage and deposit certificates to bearer for overseas stock. I ought, perhaps, to attempt shortly to define those categories. Bearer instruments by usage are, in the main,


American and Canadian share certificates which are registered in what are known as marking names—that is, a limited number of names—and they pass by endorsement; they do not pass by reregistration. They are, in fact, bearer instruments by usage. The term is, perhaps, self-explanatory.
European deposit receipts arise in circumstances when, for example, a bank owns stock registered in its name and issues receipts against those stock certificates which it may hold to individuals who may wish to participate to a greater or less extent in the total holding. At least, the purpose of the Amendment is to reduce the duty on overseas bearer instruments by usage and on deposit certificates to bearer for overseas stock to 6d. for every £25 of the market value of the stock—that is, broadly one-tenth of 1 per cent. of market value. I hope that my hon. Friends, in particular, will appreciate that we have, so to speak, restored the status quo ante of the Bill. I shall be more particular presently as to our reasons for so doing.
The Amendments also reduce to 6d. the duty on a bearer instrument issued in substitution for an original bearer which was duly stamped ad valorem. I should like to explain by way of example circumstances which might arise in which that would require to be done. I will put it in the simplest terms. In the old days, a bearer certificate would be issued with coupons attached. Those coupons would probably be small pieces of paper which would entitle the holder upon presentation to payment of a dividend distribution. The Committee is probably familiar with this procedure.
When the number of pieces of paper ran out, owing to the passage of time, the holder of the bearer certificate would be invited by advertisement to appear at the Registrar's and exchange his certificate for a new one with, attached to it a new series of coupons or, if not to exchange it for a new certificate, simply to obtain a new issue of coupons. Generally, those coupons would last a long time and exchanges were not frequent.
Today, that is not always the case. I uderstand that the coupons are getting larger and larger until they are almost

in the form of cheques, and there is nothing rare nowadays in bearer certificates with coupons attached lasting for only four or five years in camparison with the twenty or thirty years that was more usual in other circumstances. [Interruption.] As the hon. and learned Member for Kettering (Mr. Mitchison) says, it is hard on shoe leather; and that, at least, is good for British business.
There are two more general matters with which the Amendments deal. I promised that I would say something about our reason for seeking to amend the original provision in the Bill. The Committee will understand that our original proposals envisaged, so to speak, two increases in duty. The first was an increase from one-tenth of 1 per cent. to 1 per cent., and the second was that the basis of valuation would be altered from nominal value to market value.
But in almost every case—invariably so in the case of no par value shares—market value is above nominal value. There would thus in effect, have been two increases—the first from one-tenth of l per cent. to 1 per cent. and the other by altering the basis of valuation. Strong representations have been made to the Government that the effect of a swingeing increase of duty of this sort—it is very large in context—must militate against what we hope to see as a result of this Clause—though with the qualification made by the hon. Member for Cardiff, South-East (Mr. Callaghan)— namely, further development of a capital market in London.
Indeed it has been represented to us that the volume of business which is currently done in American, Canadian and other overseas stocks in London would altogether disappear. Furthermore, other items of earnings accruing to our balance of payments, and acting as a convenience also—namely, the establishment of marking names and the like—would be seriously affected as well.
As I attempted to say in an earlier discussion, the virtue of the stamp duties proposed is that they are cheap to collect and do not constitute a serious drag on the transactions to which they relate.
We are entirely satisfied, from the representations made to us, that the second of these descriptions would certainly not apply if our original proposal stood. What is worse perhaps—it has also been made clear to us—and it bears out particularly what the hon. Member for Cardiff, South-East has said, with much of which I agree, that it would lead to business being diverted into other channels and that would be bad for our balance of payments.
In the circumstances, therefore, the Chancellor decided to put the rate of duty on overseas bearer instruments back to the old rate of one-tenth of 1 per cent. with the difference that, whereas under the existing law this rate is applied to nominal value, it will in future be applied to market value. That is the correct course to take. In some cases, the Stamp Duty payable will be considerably more than in the past, but in relation to the total value of the transactions it is plain that the burden will be very much lighter. I do not think that it will have the bad effect on the market in the United Kingdom which our original proposal would have done.
I think that is all I have to say on the subject of the main Amendment, but it would be appropriate to point out that the other Amendments in the name of my right hon. Friend are almost entirely drafting and consequential on the one I have moved. I was delighted today to see that the responsible commentators in The Guardian, The Times, and the Financial Times use almost the same phrase as the chairman of the Stock Exchange on this. He said:
These Amendments will allay our anxiety.
It has never been our intention to interfere with sound and successful business, and I am very pleased to make that clear.

Mr. William Clark: May I say to my hon. Friend the Economic Secretary how grateful I am that he has at least accepted the main Amendment, except that he has changed it from nominal value to market value? There is one question which I should like to ask and which concerns the position of the London market when it arranges a loan abroad with British securities which would possibly never be used in this country. It should not be impossible for the London market to

arrange loans abroad in foreign markets with British securities without being burdened with Stamp Duty. I do not ask for an answer to this immediately but I should like my hon. Friend to consider it.
In subsection (4) of my hon. Friend's Amendment, the words are:
Inland or overseas bearer instrument given in substitution for a like instrument duly stamped….
I wonder whether that wording is sufficient, because there might be a substitution of part of a bearer security. I have worked out wording which I put on the record for the consideration of my hon. Friend. I would have thought that instead of "like instrument", one should say "like instrument or otherwise replacing in whole or in part one or more like instruments which have been duly stamped", and so on. Perhaps my hon. Friend will look at that.
I think that the feeling in the London market about the Government Amendment has been extremely favourable. I do not want to join issue with the hon. Member for Cardiff, South-East (Mr. Callaghan), but I think that it is somewhat naive to think that the London market attracts only hot money, if I may put it in jargon. The more that foreign investors come into the London market, the more help there is for our invisibles, shipping and insurance, and so on. No Government should do anything to drive any of that business away by increasing Stamp Duty and the like.
I suggest that Stamp Duty, not only in this case, but generally, can act as a deterrent to the foreign investor, and that when we are considering Stamp Duty on transfers it is well to remember that we are not considering short-term money, but securities in the industry of this country which do not affect our balance of payments because the foreigner cannot immediately take out his money as he can with short-term loans. There is some confusion in the country, if not in the Committee, about the hot money invested in this country. If the foreigner invests in shares, in securities, the adverse effect which that may have on our balance of payments is not as much as people may say.
I thought that I should say to my hon. Friend how delighted I am that at least


one of the Amendments has been accepted. I regret that we have gone over to market value. I would have thought that, administratively anyway, nominal value might have been better. I take the point about the no par value shares, but I would have thought that even in this country the day would come when we would have no par value shares; but it would be out of order to go into that now.

Mr. Diamond: This is an interesting series of Amendments which deal with some of the problems which have been raised previously, but I would not wish to broaden this into a discussion of the kind we had on the last Clause if only because I thought that what my hon. Friend the Member for Cardiff, South-East (Mr. Callaghan) said was cogent, compelling and included everything worth saying on the subject and would be very useful as our brief and almost as our Bible in these matters. Nothing I can say would add to that.
I was very interested to hear the Economic Secretary refer to the weight of Stamp Duty. He avoided saying that on the previous Clause and kept it for this. He said that Stamp Duty was a very good kind of tax and did not bear heavily on or clog the activity to which it was attached.

Mr. du Cann: If I did not say it, I meant to say it.

Mr. Diamond: That is an extraordinary statement from the Government Front Bench. The hon. Gentleman did not say it and did not say anything like it. What he said—and if he will reread the words of his speech he will find it perfectly clear —was that Stamp Duty, as we know and as we have been saying and as my hon. Friend the Member for Cardiff, South-East said very forcibly on the previous Clause, is the kind of duty which is welcome to the Revenue because it produces revenue and because, on share transfers, it does not stop shares being transferred. In fact, the whole of his argument on the previous Clause was to this effect.
9.0 p.m.
I do not want to delay any more on that. I want now to turn to the rather more technical points involved in the Clause and the Amendments. We recog-

nise the wisdom of the Government in switching from a nominal to a market basis. I heard what the hon. Member for Nottingham, South (Mr. W. Clark) said, but, with deference, I do not think he is right. I believe that the Government are right in making the switch. We shall be very wary indeed about any comments made or pressure applied to the Government to introduce no par value shares. To the other part of it we have no objection whatsoever. This part, however, is rather technical. They are bearer shares, or virtually so, and, as the Economic Secretary explained, the Canadian and American shares to which he referred are virtually bearer shares which pass not simply by delivery but by delivery and endorsement and are nearly in the same category as bearer shares. I am grateful to the Economic Secretary for not suggesting that they were ejusdem generis, a phrase that we too often hear in this Chamber.
We have hesitations about bearer shares. I want to make that absolutely clear. We think that bearer instruments are the kind which can be used by those who seek to avoid their proper tax liability. In this sense we do not wish to encourage inland bearer instruments. The way to deal with tax avoidance is not by Stamp Duty or by any of the methods adopted in the Clause. Therefore, in welcoming, or accepting, the Government Amendment we want to make it perfectly clear that we are not favouring or encouraging the growth of inland bearer instruments. These are mainly what are referred to in reference to giving benefit to overseas bearer instruments and enabling fair competition to take place. That is not in any sense contradictory to what my hon. Friend the Member for Cardiff, South-East said on a previous Clause. That is an entirely different matter. In so far as this is limited purely to assisting in that purpose, we have no wish to prevent the Government from getting the Amendment.

Mr. du Cann: I should like, in courtesy, to reply to the questions that I have been asked by my hon. Friend the Member for Nottingham, South (Mr. W. Clark) and to make two comments simply on what the hon. Member for Gloucester (Mr. Diamond) has said. I should also like, very shortly, to say a further word for the record on the very


large series of Amendments that we are discussing and to give an explanation to the Committee.
Replying to my hon. Friend the Member for Nottingham, South, the first question that he asked was highly technical, and I am not certain that I followed him entirely. What I thought he was interested in was the question of the liability of a United Kingdom company to pay United Kingdom Stamp Duty at bearer rates on issues of stock even if the issues were made abroad. I think that was his point.

Mr. W. Clark: Yes.

Mr. du Cann: I am glad that I followed my hon. Friend and could define it accurately. I can tell him that we will most certainly look into the matter.
My hon. Friend also raised the question of subsection (4) of the Amendment. I am bound to tell him that we think the wording is adequate. We have considered i t with very great care. On the other hand, he was kind enough to make a new suggestion and put the wording on the record, and we will certainly look at that.
The third point raised by my hon. Friend was the question of no par value shares. The hon. Member for Gloucester referred to this, and this will be my first comment to him. I note that my hon. Friend is in favour and that the hon. Member for Gloucester has, on the whole, reservations. I suppose that the truth of the matter is that we shall have to await the debate on Jenkins—my views on this subject are known—and I think we shall have an opportunity to debate it, not that this is a matter for me, before very long. If I may make a joke of it, I always felt that I was one of the few people in England who was able to get away with the introduction of no par value shares, but I will not pursue that too far.
Secondly, the hon. Member for Gloucester warned us about the danger of inland bearer instruments. I dare say that he was right to do so, from a practical point of view. There are complications over the whole field, of which we are only too well aware. But he went on to make the point that we were here talking, on the whole, about overseas bearers. That is an entirely different kettle of fish.
In discussing the plethora of Amendments I thought it appropriate not to go an for too long, and not to refer to the other Amendments. I merely make the point that if the Committee approves the purposes that we are discussing in relation to the other Amendments, these, although dealing with another Clause, are relative to the earlier ones, in that they provide the machinery therefor.

Amendment agreed to.

Mr. du Cann: I beg to move, in page 54, line 37, to leave out "EXEMPTION" and to insert "EXEMPTIONS"

The Temporary Chairman: With this Amendment we can take the Government Amendments in page 54, line 40, and in page 56, line 2.

Mr. du Cann: That would certainly meet my convenience, Mr. Williams, and I think that it would be for the general convenience of the Committee. These Amendments deal with related matters. I can explain the point fairly shortly. We are concerned to clarify the position of allotment letters and other similar documents.
Certain doubts about the position of allotment letters and their liability for duty have been expressed. The Committee may remember the remarks which my hon. and learned Friend the Financial Secretary made during the Second Reading debate:
I should make one point clear. There is no intention that Stamp Duty should be imposed on new issues or rights issues and allotment letters of British companies."—[OFFICIAL REPORT, 6th May, 1963: Vol. 676, c. 56.]
Although it is true to say that the position under the Bill as originally drafted was not entirely clear, the Amendments make it clear that such instruments as allotment letters are exempt from duty under the Clause where their life is limited to six months or less, but where their life exceeds six months they are chargeable.
We considered the question of the time limit very carefully. This is an extremely important matter. There are some ordinary limits to the life of allotment letters in any case. One might relate to the administration arrangements of companies, and another, in appropriate cases, to the requirements of the London Stock


Exchange, but it seemed to us that it was not satisfactory to rely upon those limitations alone. It is possible to envisage a situation where an entirely new class of bearer instrument might develop, if some fixed limit were not set. We considered that a period of six months would be best as a condition of exemption from duty. It is long enough to cover all the ordinary purposes for which allotment letters are normally available.
Having said those few explanatory words, I hope that the Committee will feel that they are logical and sensible. The other Amendments with which we are dealing are entirely consequential.

Mr. Diamond: We share with the Economic Secretary the view that these matters should be made clear and, to that extent, this series of Amendments makes even clearer the content of the Clause as it stands.
It is difficult for my hon. Friends and I to express an opinion on the question of the six months. I should have thought that such a period was verging on the long side for a bearer of allotment, and so on. Might this period not be beyond the normal practice? However, this is a somewhat minor matter upon which we would not have sufficient experience to express a valuable contribution.
I am unable to understand how it comes about that this series of Amendments comes before us so late in our consideration of the Bill. We are, once again, in the position about which we complained a short while ago. On Second Reading, the Chancellor made it absolutely clear that this matter was to be considered and that, if necessary, Amendments would be put down. I apologise for referring to this again, because the Financial Secretary's apology on the last occasion was so full that no one but a "heel" would refer to it again. That is why it was so full, I suppose. Nevertheless, I must at least record the fact that this is not the first occasion on which the Government have thought fit, despite the fact that the matter was due for consideration, to table Amendments not at the last possible moment, but at a very late stage.
As far as I am aware, this group of Amendments was tabled during the last

few days. They are not actually starred, but they might have been had we started out consideration of the Bill only a day earlier. It is not helpful to the Committee that this habit should develop; that the Government should keep their Amendments until the last possible moment and, therefore, ensure that no one but the Government are aware of what the Amendments are driving at. By doing this, the debate is restricted and made more difficult.
The Government must not assume that simply because their distinguished representatives have nothing to do all day except read briefs explaining in detail what Amendments are all about that every other hon. Member, busy lawyers and solicitors perhaps, have nothing else to do but grab at the Order Notice Paper first thing in the morning and ask themselves, "What new Amendments have the Government put down today?"—and spend the rest of the day investigating what they are all about.
Many hon. Members have other duties —political ones, of course—in Parliament and elsewhere. It is not always possible for them to give the exclusive attention needed to obtain a full explanation of some Amendment. I think that I have said enough on this score. I do not wish to rub it in unduly and I am sure that the Economic Secretary will not find it necessary to repeat the words he used on the previous occasion.
It would be helpful to us all if, in future, a series of Amendments in the name of the Government were put down in a way and at a time when all hon. Members could have a reasonable opportunity of considering them.

Amendment agreed to.

Further Amendments made: In line 40, at end insert:
2. Bearer letter of allotment, bearer letter of fights, scrip, scrip certificate to bearer or other similar instrument to bearer where the letter, scrip, certificate or instrument is required to be surrendered not later than six months after issue.
3. Renounceable letter of allotment, letter of rights or other similar instrument where the rights under the letter or instrument are renounceable not later than six months after the issue of the letter or instrument.

In page 55, line 17, at end insert:
(iii) any deposit certificate to bearer.

In line 24 leave out "(iii)" and insert "(iv)".

In line 25, at end insert:
(c) "deposit certificate" means an instrument acknowledging the deposit of stock and entitling the bearer to rights (whether expressed as units or otherwise) in or in relation to the stock deposited or equivalent stock; and "deposit certificate for overseas stock" means a deposit certificate in respect of stock of any one company or body of persons not being such a company or body as is mentioned in paragraph (a) above.

In line 27, leave out "(iii)" and insert "(iv)".

In page 56, line 2, after "stock". insert:
and any right to an allotment of or to subscribe for stock ".—[Mr. du Cann.]

Clause 57.—(PAYMENT OF DUTY.)

9.15 p.m.

Mr. du Cann: I beg to move, in page 55, line 22, to leave out from "duty" to the end of line 26 and to insert:
chargeable by virtue of paragraph (b) above on the transfer of stock shall be chargeable only where duty would be chargeable under or by reference to the heading 'Conveyance or Transfer on sale' in Schedule 1 to the Stamp Act 1891 if the transfer were effected by an instrument not being a bearer instrument".
I hope to be able to explain this somewhat technical matter simply and rationally. The whole object of making this Amendment is to give effect to what was our original intention. The original drafting of the Clause was faulty. The proviso in the Bill as it stands deals with bearers by usage only. It should deal with all classes of bearers. It catches cases in respect of which duty should not be paid. That, as I am sure the Committee will understand, is unintentional.
I shall give one specific example. The Committee will know that if Mr. A sells or gives a share to Mr. B, full transfer duty is payable. I am speaking of registered securities. That is reasonable, and that is how the system works. If, on the other hand, Mr. B or bank B is holding the stock as nominee for Mr. A on the transfer from one name to the other it is entirely a nominal matter and nominal duty is paid. There can be other transfers of that sort in respect of which nominal duty is paid, for example, from the executors of a deceased person to a beneficiary under his will, which are perfectly proper and

reasonable transactions where it would be quite proper for transfer duty not to be paid.
It would be wrong for the whole load of bearer issue to follow on a transaction of that sort which is not a transfer of beneficial ownership in the ordinary sense of the term. It is the intention of this proviso to exclude these bearer stocks, both bearers by usage as originally drafted and all these, from such a situation.

Mr. Mitchison: I wish to thank the Economic Secretary and to say that we see no objection to this.

Amendment agreed to.

Further Amendment made: In page 57. line 14, leave out from "is" to "stamped" in line 15 and insert "not duly".—[Mr. du Cann.]

Mr. du Cann: I beg to move, in page 57, line 19, after "cent.", to insert "per annum".
As a matter of courtesy, I should explain to the Committee that this is a drafting Amendment. The words we are proposing to put in were accidentally left out.

Amendment agreed to.

Further Amendment made: In page 57, line 29, after "valorem", insert:
or with a stamp indicating that it is chargeable under paragraph (4) of the said heading and with the duty specified in that paragraph".—[Mr. du Cann.]

Clause, as amended, ordered to stand part of the Bill.

Clause 58.—(ASCERTAINMENT OF MARKET VALUE.)

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: This Clause is intended for the ascertainment of the market value for the purposes of the stamp. In paragraph (1, a) we read,
Where the stock was offered for public subscription within twelve months before the issue of the instrument, the amount subscribed for the stock;
Is that the right way to ascertain market values?
On the Stock Exchange we have what are called placings, and the result of placings always seems to me that a lucky


few get the stock a good deal cheaper than anybody else. The market value of that stock might well be a good deal higher than the amount subscribed for the stock within a period of twelve months before that.

Mr. du Cann: I am interested in the point raised by the hon. and learned Member for Kettering (Mr. Mitchison), and I will consider it more fully. I suggest that there is a difference between paragraph (a) and paragraph (b). I am saying this without the deep consideration which the point certainly will have, but public subscription does not necessarily coincide with quotation, and that may well be the answer to the point. The placing would presumably be under paragraph (b) rather than under paragraph (a), but I should be very happy to look at the point. In determining the market value, the object is to get the market value and not an artificially low price. I will pursue the hon. and learned Member's question with that very much in mind.

Mr. Mitchison: That does not quite meet the point. I dare say the hon. Member is right and that it will come under paragraph (b), but that paragraph refers to
the value of the stock on the first day within one month after the issue of the instrument on which sock of that description is dealt in on a Stock Exchange in the United Kingdom…
With these placings, what usually happens is that stock is dealt in at a price higher than that at which it is placed, and that price then, at any rate for a short period, rises quite sharply. We have had a number of instances lately. If I remember rightly, the last time this kind of thing arose in connection with a Finance Bill debate some stuff called ready-mixed concrete—which had nothing to do with the heads of Treasury Ministers, but which was stock—had recently been placed on the Stock Exchange and bad had a remarkable and rapid advance in value. In fact, one had to become Chancellor of the Exchequer before one could look at it.

Mr. du Cann: I am almost speechless after that extremely happily phrased insult which the hon. and learned Member so gaily threw at us. For once in

my life I was a little ahead of him. I took the second point which he made while he was in process of making the first. I will have a good look at it.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clauses 59 and 60 ordered to stand part of the Bill.

Clause 61.—(GIFTS IN CONSIDERATION OF MARRIAGE.)

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: We are supposing that this transfers to this particular sphere what I might call the Sultan of Foa principle, or the Courtauld principle, which we considered in connection with an earlier Clause. This may have nothing whatever to do with the Sultan of Foa Case, or the Courtauld case. May we be informed?

Mr. Barber: The hon. and learned Member for Kettering (Mr. Mitchison) is quite right. This Clause contains a Stamp Duty provision corresponding to the Estate Duty provision in Clause 50. It provides, except in so far as goods would qualify under Clause 50, for gifts made in consideration of a marriage qualifying for the relief from Stamp Duty.
Perhaps I may say that I overheard the hon. and learned Gentleman saying a moment ago, very quietly, to his hon. Friend the Member for Sowerby (Mr. Houghton), "Come on, Douglas, it is your turn." The last time I heard a whisper from him to his hon. Friend, I think that I heard him say of myself, when I was dealing with a previous Clause "I think that he has missed a line out of his brief".

Mr. Graham Page: I do not like to intervene in this back-chat across the Floor of the Committee. But I do not feel at all happy about what has been said by my hon. Friend. I return to what I said on a previous occasion in connection with the Stamp Duty liability. It seems to me that it is making a marriage settlement subject to conveyance duty rather than a voluntary settlement by gift. If it is going to do this to a settlement by the parties to a


marriage, I think that it is grossly unfair. It is certainly altering the law with regard to gifts and making marriage no longer a good consideration.
Any settlement of a marriage will be a conveyance and liable to conveyance duty. If that is so, I feel that it ought to be stated far more clearly, rather than hidden in the rather unintelligible language of Clause 61. It was only in a few words that my hon. Friend put this to the Committee, but it is a major change in the law.

Mr. Barber: Perhaps I may elaborate what I said a few moments ago.
Under Section 74 of the Finance (1909–1910) Act, 1910, voluntary dispositions inter vivos that is gifts—including the conveyance of property to the trustees of a settlement—are charged to ad valorem duty on their market value at the normal rate of 2 per cent., which has now been reduced to 1 per cent. There is, however, an exception for gifts made in consideration of marriage. The decision in the Courtauld case could therefore be invoked for the avoidance of Stamp Duty as well as Estate Duty on property given away on the occasion of a marriage to persons not within the marriage consideration—using the phrase in the way I did when we considered Clause 50.
All that this Clause does, in the same way as with Clause 50, is to put the matter broadly in the position in which it was assumed to be by everybody before that case was decided by the House of Lords. If the Committee comes to the conclusion as with Clause 50 that this is, in the circumstances, a reasonable thing to do, as the same considerations apply with regard to the Stamp Duty exemption, I hope that the Committee will take the same view here.

9.30 p.m.

Mr. Houghton: For the last hour I have been absolutely mesmerised by this Clause. I knew that it fell to me, as a matter of duty, to make any suitable comments about it from this side of the Committee, or to ask any reasonable question about it. I came to the conclusion that I understood it completely. I thought that it was perfectly proper, as a link with Clause 45, and I think that when a Member on these benches in charge of

a Clause chooses, in his judgment, to remain silent, it ill becomes one of his colleagues to get up and say something. However, since the ball has started rolling, I cannot sit in my place and let it be thought that my silence is some form of Front Bench delinquency.
I think it perfectly right that a transfer not in consideration of marriage within the law of Estate Duty should have a beneficial rate of Stamp Duty, which is what the Clause is about. Not only did I think that I understood the Clause, but I was attracted by it, because it is one of the four shortest Clauses in the Bill, which is another especial merit. As I see the Chief Secretary in his place, I might perhaps say that he seems to have had a much easier time on the Bill than I have.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 62.—(MISCELLANEOUS EXEMPTIONS.)

Mr. du Cann: I beg to move, in page 59, line 39, at the beginning to insert:
(1) Any instrument which is exempt from duty under the heading set out in section 56(1) of this Act by virtue of exemption 3 in that heading or would be so exempt if it were otherwise chargeable under that heading shall be exempt from stamp duty under or by reference to the heading "Conveyance or Transfer on sale" in Schedule I to the Stamp Act 1891.
It will be within the recollection of the Committee that when we were discussing the Amendments in Clause 56, page 54, line 37, in page 54, line 40, and in page 56, line 2, we discussed the position of allotment letters. This Amendment is a follow-up to those Amendments. This new subsection—which, I hope, will find favour with the Committee—clarifies the position as regards the liability to transfer duty on renounce-able allotment letters.
As I earlier had the opportunity, for which I am grateful, to explain the position of allotment letters and the Committee was then good enough to accept our suggestions, I hope that it will similarly accept this point, which is consequential upon those three Amendments.

Amendment agreed to.

Clause, as amended, ordered to stand part of the Bill.

Clause 63 ordered to stand part of the Bill.

Clause 64.—(ABOLITION OF LAND TAX.)

Question proposed, That the Clause stand part of the Bill.

Mr. Houghton: The Committee will expect me to utter my customary lamentations on the abolition of any form of taxation, but I do not think that we should pass, as a matter of form, the abolition of a tax which dates back to 1692, and which was the forerunner of our Income Tax system.
The yield from land tax has been falling in recent years because of the exoneration of small amounts and the compulsory redemptions that have been taking place under earlier legislation. I suppose that the Committee thought that land tax would be left to peter out, because of the compulsory redemption of the tax, accompanied by the transfers taking place after 1950—that if we waited long enough it would disappear of its own accord. I suppose, too, that those who have redeemed their land tax in recent years may feel that they have been a little hardly done by. When we pay a price to redeem a tax, and then find that other people have it abolished without fee or payment, there is a feeling of comparative grievance.
The yield in 1961-62 was L191,000, but that of itself does not justify abolishing a tax. Schedule B should have been abolished years ago on the basis of the small yield, yet it has lasted until now. I think that I could claim to have put down on the Order Paper on the Finance Bill more new Clauses abolishing Schedule B than any other hon. Member, but I have never had the good fortune to have that new Clause called on any Finance Bill for the last 15 years. Then, lo and behold, the Chancellor of the Exchequer sticks it in his Finance Bill. This is the sort of grievance that the Opposition have to endure.
Now we find the land tax going. Here, we are not only abolishing the land tax but we are abolishing one of the pranks played on the new recruit in the Inland Revenue on All Fools Day. When I

entered the Inland Revenue many years ago, on 1st April I was told to go down to the collector to pick up the land tax additionals. There is no such thing as additional assessments for land tax, as the Committee will understand, so that was one of the fruitless errands on which one was sent on 1st April in those days. Now it can never happen again. It is like the new recruit to the Army being sent out to whitewash the "Last Post".
Here it goes, and the Land Tax Commissioners with it, and the Clerk to the Land Tax Commissioners—these ancient functionaries. We should say farewell to them in a spirit of thanksgiving for all the work they have done for Chancellors of the Exchequer in the past. Where would the State have been today without the land tax since 1692? We could never have got through the Napoleonic wars and might have been a province of France for the last 100 years or more.
I think that this is an occasion, and for the sake of £191,000 a year the Chancellor is scrubbing out of our taxation system an impost of great antiquity, of modest proportions, easy to collect, and of great sentimental interest to anyone engaged in the field of taxation. I was giving a lecture this morning to a distinguished body of visitors from overseas. In the course of comments on what I had said, one gentleman from overseas said, "The speaker seems to be very enthusiastic about taxation for its own sake". Well, when one has been connected with the Inland Revenue for 30 years, naturally one regards taxation as one's business, and one is bound to have great affection for different branches of one's business.
After all, the proportion of tax which a collector collects is of great interest to him as well as to his head office, because that is an index of the success of his business. I do not think that we should lightly abolish forms of taxation which have engaged the attention of successive generations of Inland Revenue officials. However, there it is. Another "Goodbye". Two "Goodbyes" in one Bill. I am bound to say that I sit down under the stress of great emotion.

Mr. Robert Mathew: I cannot join in the lamentations of the hon. Member for Sowerby (Mr. Houghton) at the passing of his professional and traditional friend. I greet with pleasure any


abatement of taxation, and the disappearance of this historic tax, which is now outworn, is much to be welcomed.
To revert to a point which the hon. Gentleman mentioned rather casually, the Clause will, it seems to me, lead to some inequity. I refer to subsection (3) and the question of land tax, which has already been redeemed where the land has changed hands since 1949 and the new owner, at some time between 1949 and 25th March this year, has had to redeem the land tax on his property at a sum equal to twenty-five times the annual tax. Under the Clause, the liability remains. The money has already been paid. There will, therefore, be two classes of taxpayer over the dividing line who will be treated differently.
I concede at once that, when changes in taxation of this kind occur, it is necessary to draw a line somewhere, and there will always be some difference in luck between different people, according to where the line falls. In this case, I submit, the result is unduly harsh and rigid. Twenty-five times the annual tax can, in certain cases, be a very large sum. I ask my right hon. Friend to look at the matter again. Cannot the rigid harshness between the lucky and the unlucky—that is what it is—be mitigated? Is it possible to make the change by a phased operation so that those who have still a major part of the twenty-five years left to run at 25th March will be entitled to a remission?
There are, I believe, a number of cases where the inequity will be obvious. There is no very large sum involved because the tax is outworn and is bringing in very little in 1963. It is inequitable that the mere chance of time should entail that one class of owner has had to meet the tax liability in full whereas another gets off scot-free and will never have to pay at all.
No doubt, there will be drafting and administrative difficulties in what I suggest, but it is the duty of the Government in taxation matters to go out of their way to be fair as between citizens whose basic tax liability was identical before an arbitrary date. I ask my right hon. Friend to make the necessary adjustment on Report.

Mr. Wade: I welcome the abolition of the tax. It accords with my views on the radical reform of taxation and the

abolition of unnecessary and antiquated taxes. After listening to the sorrowful speech of the hon. Member for Sowerby (Mr. Houghton), which almost brought tears to our eyes, I wonder whether the spokesman of the Treasury can inform us to what extent the change will give rise to reduancy in the Department of Inland Revenue. If the answer is satisfactory, it may reduce somewhat the hon. Gentleman's grief.

9.45 p.m.

Colonel Sir Harwood Harrison: I congratulate my right hon. Friend on removing this pernicious and, to my mind, unfair tax on a certain section of our population. I was surprised to hear the words of the hon. Member for Huddersfield, West (Mr. Wade). When I saw the large number of two of the Liberal Party in the Committee, I thought that they had, perhaps, come to oppose the Clause since, as I remember, a famous Chancellor of the Exchequer, afterwards the Prime Minister, of the Liberal Party, over fifty years ago, was very keen on land taxes.

Mr. Jeremy Thorpe: That was very different.

Sir H. Harrison: That is typical of the Liberal Party. It never sticks to any principles.
I do not think the hon. Member for Sowerby (Mr. Houghton) need be so tearful about the passing of this tax, because it was his own Government which got a great deal more out of these taxpayers by the Act of 1949.
The point that I wish particularly to put to my hon. Friend the Financial Secretary for elucidation was this. In choosing the date on which this tax ends as 24th March, I presume that it is clear that in any change of property on 25th March, I963—and many properties are sold on Lady Day—the people concerned will not have to redeem the tax. I have had one or two letters on this point. It is difficult to fix this date, but, as far as I can see, I think that my right hon. Friend has done the fair thing. I add my plea to that of my hon. Friend the Member for Honiton (Mr. Mathew).

Mr. Barber: Perhaps I can deal, first, with the points made by my hon. Friend the Member for Honiton (Mr. Mathew)


and my hon. and gallant Friend the Member for Eye (Sir H. Harrison). My hon. and gallant Friend is correct in thinking that the land tax will be abolished as from 24th March this year, which is the end of the land tax year 1962–63.
The point which my hon. Friend the Member for Honiton raised, which was echoed by my hon. and gallant Friend the Member for Eye, was considered by the Chancellor of the Exchequer before he announced this proposal in his Budget speech. We recognised that immediately we decided to abolish the land tax altogether there would inevitably be some disappointment as between those who fell on one side or the other of the date which we chose for abolition.
It is specifically laid down in subsection (3) that the Clause is not to
affect any compulsory redemption
under the relevant Clause
where the date on which the property became liable to redemption
fell on or before 24th March this year. That subsection was included in the Clause to make the position quite clear beyond argument to everyone concerned. In fact, in strict law, I think that it is probably unnecessary, because there is nothing in subsection (1) which removes the liability to compulsory redemption in these cases.
As my hon. Friend so fairly said, whenever the law is changed to remove a liability, the change may operate from a fixed date, and, whatever date one chooses, there are bound to be people whose cases fall just on the wrong side of it and who think that they should have had the benefit of the change. To put the operative date back for a week, a month, or even six months would not remove grievances of this kind. It would merely transfer them to a different set of people.
It would have been impossible simply to provide that outstanding redemptions should not be collected because this would merely have been penalising the prompt payer in favour of the dilatory payer. I assure my hon. Friend that we considered the point which he raised most carefully. If it were a novel point which my right hon. Friend has not con-

sidered in relation to the Budget, obviously it would be right for me to say that we would think about it again, but I know my hon. Friend and my hon. and gallant Friend well enough to realise that they would prefer me, on a matter like this, to be perfectly frank and to tell them that we were faced with this very problem and gave it our consideration before the change was announced, and that we came to the conclusion that it was impossible to deal with the matter in any other way.
The hon. Member for Sowerby (Mr. Houghton) referred to the fact that the land tax is a remnant of an old tax which, I think he said, was instituted in England in 1692. In fact, I think that I am right in saying that it existed rather earlier in Scotland. In 1798, Mr. Pitt stabilised the charges on land and enabled land owners to redeem for a capital sum. Since then the value of this tax has dwindled. I have the figures here, but I do not want to spoil the hon. Gentleman's evening further by rubbing in the details of what has been happening to this tax over the years. Suffice it to say that we have now abolished it with effect from 25th March.
The hon. Member for Huddersfield, West (Mr. Wade) asked about redundancy which might arise as a result of this Measure. I think that with the additional work which the Inland Revenue has to do, this is unlikely to occur. The hon. Member himself referred, I thought somewhat regretfully, to the possible administrative savings which will occur as a result of this, and he will, I think, be interested to know that in these days of affluence, and, to some extent, inflation, there are five clerks to the Land Tax Commissioners who are not also clerks to the General Commissioners. I am told that they are paid at rates from £100 downwards. These gentleman will, from 1st October this year, cease to receive that remuneration.
I sympathise very much with the feelings of the hon. Member for Sowerby. I have rarely been so upset by a speech from the Opposition Front Bench.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 65.—(PROFITS TAX PROVISIONS IN CONNECTION WITH PART II OF THIS ACT.)

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: On this side, we have been carefully through the provisions of the Clause. They appear to us simply to adapt for the purposes of Profits Tax previous provisions in the Bill and, therefore, we see no objection to the Clause.

Mr. du Cann: I would simply confirm that the hon. and learned Gentleman's appreciation of the situation is, as so often, entirely correct.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 66.—(EXCHEQUER ADVANCES UNDER FINANCE ACT, 1956, s. 42.)

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: This is rather a different matter. This Clause continues until the end of August, 1965, certain borrowing powers of the electricity and gas authorities, subject to limitations mentioned in subsection (1)(a) and the provisions afterwards provide for Orders fixing maximum amounts beyond the end of August, 1964, and for affirmative procedure to apply to those Orders.
The terms of the Clause are perfectly clear. The reason for it and the relation of it to the present position are not so clear. I notice that in his Budget statement the Chancellor simply said:
The powers to make Exchequer advances to the gas and electricity industries expire at the end of August, and I shall be moving a special procedure Resolution"—
and that was done—
to enable these powers to be renewed in the Finance Bill."—[OFFICIAL REPORT, 3rd April, 1963; Vol. 675, c. 485.]
That is really all we know about it. It contains no explanation about the amount, and while I do not want in any way to discourage any eloquence on the Government Front Bench, we on this side of the Committee would like shortly to hear how this figure has been arrived at and how it compares with the present figures. We do not wish to discuss it now, but in the light of what is said to

consider whether we should not revert to it at a later stage of the Bill—it might be a question of Recommittal or on Report, I am not sure which—but I think that a statement from the Government would give us material to consider. On the Second Reading of the Bill all that was said about these provisions was simply a reference back to the Budget statement.

Mr. Boyd-Carpenter: The hon. and learned Member, no doubt by a slip of the tongue, said that the Clause extended the borrowing powers of the gas and electricity industries. That is not so, because, as the hon. and learned Member will recall, those borrowing powers are laid down in separate legislation generally related to the nationalised industry concerned.
The Clause gives to the Exchequer power to lend up to the limit of the extent that those industries are by that other legislation empowered to borrow. The Clause is an extension in the case of those two industries of the powers contained originally in Section 42 of the 1956 Finance Act as extended by Section 78 of the 1960 Act.
The earlier Clauses cover lending to the other nationalised industries, but as opportunity has offered with the presentation of borrowing powers legislation on behalf of those industries there has in recent years been incorporated also the related lending power of the Exchequer. We have, therefore, narrowed down the provisions necessary in a Finance Bill to the gas and electricity industries. The Clause proposes to extend those lending powers for two years.
As the hon. and learned Gentleman has noted, there is, first, a power to increase the total lending, including that already lent, to the figure of £3,280 million by August, 1964, and to extend it further by Statutory Instrument, subject to the affirmative Resolution procedure, in the following year. The figure for the period to August, 1964, is based on the fact that the existing lending is likely to be about £2,834 million by the time the powers expire in August this year. The difference between that figure and the £3,280 million is a reasonable estimate of the requirements over that period of the gas and electricity industries, all within the borrowing powers already authorised by Parliament.
For the further year, a Statutory Instrument will be necessary. The Statutory Instrument procedure is probably the better, but, as the hon. and learned Member will appreciate, there would not be time between the Royal Assent to the Bill and August of this year, however optimistic we may be about the progress of the Bill, to lay a Statutory Instrument.
The purpose is, therefore, as regards these two industries, simply to enable the Exchequer to lend in respect of sums that those industries are already empowered by Parliament to borrow, and the Clause is substantially in the form, related now to these two industries, of the 1960 Act.

Mr. Mitchison: We would like to consider what the right hon. Gentleman has said. It was, as he said, a slip of the tongue if I put it round the wrong way. Borrowing by the industries and lending by the Treasury are two sides of the same thing. I understand the right hon. Gentleman to assure the Committee that the sum of £3,280 million, which is the limit which appears in the Clause, is a limit already authorised from the borrowing end by other legislation.

Mr. Boyd-Carpenter: indicated assent.

Mr. Mitchison: Let us for the moment leave it at that.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 67 ordered to stand part of the Bill.

Clause 68.—(REDEMPTION OF GUARANTEED LAND STOCK.)

Question proposed, That the Clause stand part of the Bill.

Mr. Mitchison: I rise only to say I am surprised that my hon. Friend the Member for Sowerby (Mr. Houghton) does not say anything about the redemption of guaranteed land stock. This seems to me to be the financial occasion recalling the past, in some cases the vivid and lively past, and certainly it should not pass without a word—which will take us, with the next Clause, just about up to ten o'clock.

Mr. du Cann: I do not know whether that was supposed to be a hint for a short explanation—

Mr. Mitchison: indicated dissent.

Mr. du Cann: If it was not, I will sit down promptly.

Question put and agreed to.

Clause ordered to stand part of the Bill.

Clause 69 ordered to stand part of the Bill.

10.0 p.m.

Mr. Boyd-Carpenter: I beg to move,
That the Chairman do report Progress and ask leave to sit again.
Although, by the hours now kept in another place, we are at a very early stage of the evening, there are, I think, two cogent reasons why we should at this stage suspend our deliberations until next week.
The first is that we shall be coming now to the new Clauses, and I think that it would be to the convenience of the Committee to start fresh on them next week. The second is that we have already, during the course of the Bill, totally abolished two taxes, and I think that if we were to subject the emotional stability of the hon. Member for Sowerby (Mr. Houghton) to another strain after that, we should be taking wholesale liberties with a very precious constitution.

Question put and agreed to.

Committee report Progress; to sit again Tomorrow.

Orders of the Day — POLARIS SUBMARINE BASE, SCOTLAND

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Rees.]

10.1 p.m.

Mr. Emrys Hughes: I wish to call attention to the proposals for the new Polaris submarine base in the west of Scotland, contained in the statement made by the then Civil Lord of the Admiralty on 24th April. That statement was very brief and contained references to the expenditure of a considerable sum of money. It was the swansong of the hon. Member for Hendon, North (Mr. C. Ian Orr-Ewing) as Civil Lord, after six and a half years in that office; but it was a very expensive one.
The hon. Gentleman spoke for about five minutes, at the rate of £5 million a


minute. Now he has departed to take up, I understand, the chairmanship of two business concerns which are subsidiaries of American companies, and is thus continuing in business what he did so faithfully at the Admiralty.
I asked him a lot of questions during his term at the Admiralty and usually received an answer. He owes me a debt of gratitude because originally this Adjournment would have taken place at 3.30 a.m. following an intricate Scottish debate in which my hon. Friends the Members for Kilmarnock (Mr. Ross) and Edinburgh, East (Mr. Willis) were greatly interested. But I saved him those hours of suffering by postponing it. That was the only occasion, I think, that he mentioned me in his prayers.
Now we have a new Civil Lord, whom we welcome, but with a certain amount of sympathy. The job is not one for which there must be a rush among members of the Government. I do not know how the hon. Gentleman felt when he entered his office for the first time. I suppose as he went through the ante-room and looked at the desk on which, I understand, there is a bronze plate saying,
Here Mr. Vassall worked for six years",
he was looked upon with considerable suspicion by the gentleman whose duty it is to look after security. They must have said, "What is this problem? Is this new occupant of the office a security risk?" I hope that the hon. Gentleman satisfied those gentlemen and that there is nothing dark in his past. I hope that he has not been studying Karl Marx, or the works of my right hon. Friend the Member for Easington (Mr. Shinwell) on any occasion, or anything else to make them think that he has any subtle indirect connection with the Communist Party.
I should like him to give us some more details than were given in the statement about the new base in Scotland. The Polaris base has been the subject of considerable controversy ever since the Americans were established at Holy Loch. We understood that there was considerable co-operation between the Admiralty and the Americans. The Loch has become busier and busier and the base has become one of the busiest outposts in the west of Scotland. We were told that it was not a base but a depot, and that it was not a danger to the west of Scotland because the real base was in America.
Now we are to have a real base and two posts at which there are two different lots of submarines, one American, operating from Holy Loch, and the other British, operating from Arrochar, not far away. We are told that the American submarines are going into action and that Holy Loch will be busier and busier because the submarines are to go to the Mediterranean where there is not a country which is prepared to take them. It appears that we are the only people who are enthusiastic about having American Polaris submarines operating from our territory.
When the American Polaris submarines arrived, we were told of their tremendous destructive power. We were told that one could carry enough missiles to destroy at least a dozen cities of the U.S.S.R. As time goes on and before the British base is ready, presumably there will be 40 of these American submarines patrolling the seas with tremendous destructive power in the event of a nuclear war.
Why do we want another lot of destructive power? Why are we going to this considerable expenditure in addition to the American Polaris base? If we are working in co-operation with the Americans, is there any justification for what is called the development of the independent deterrent? I do not believe that there is any such justification. I believe that this sudden decision by the Prime Minister will involve us in the expenditure of a very large sum of public money. It was badly thought out and we are now beginning to have the first instalment of the Bill which is to be about £25 million.
When the Prime Minister comes to Scotland, he talks about his connection with the Highlands. I would not be averse to a cairn memorial for the Prime Minister, but when it comes to a base costing £25 million, I think that we are entitled to draw the line. Overlooking the sea at Oban there is a building called McCaig's Folly. I believe that the new base near Arrochar will ultimately be known as "Macmillan's Folly".
What are the Admiralty to do about the labour for this base? We were told in the statement that the base would involve a great deal of constructional work. The Ministry of Public Building and Works is to put its squads into operation and they are to undertake


public works amounting to a large sum of money. That is about the cost of 12,000 houses, and we need more houses in Scotland.
Whichever way one looks at this, it is a diversion of constructional activity from the things we really need in Scotland—houses, schools, hospitals, and the factories that we need to put our Scottish economy on a sound foundation. The Minister may shake his head, but I cannot see any other possibility. The men concerned on the project will be making something of concrete and stone, and at present we need all forms of labour—manual, skilled and administrative—in order to combat Scotland's social problems. We need far more money to be spent on the things to which I have referred than on this so-called independent nuclear deterrent.
When the statement was made in the House hon. Members opposite said, "Oh, yes, this means work for Scotland." That is the bait. There is a serious unemployment problem at present, and the Government expect us to jump and wave our hands with delight at anything offered in which work is part of the programme. We appreciate that any kind of work is acceptable to the unemployed rather than that they should have no income at all. Even if it were proposed to take a lump out of Ben Lomond and put it in the Loch, that would be work; but from the point of view of a real building-up of our economy, we might as well put a bit of Ben Lomond in the Loch as spend this money on the base.
The Clyde area has a serious problem causing a great deal of unemployment at present. During the last fortnight we have seen in the newspapers notices about ships which could have been built in the Clyde being built in Japan. Also, ships built in the Clyde have been taken away to be overhauled and refitted in Holland. Other orders which might have gone to the Clyde have gone to Sweden.
It is true that a great deal of naval building is going on in the Clyde. But this other activity is devoted to something which cannot contribute to a really fundamental solution of the Scottish shipbuilding problem. At the same time, our competitors are building ships and are able to modernise their shipyards. While

the project gives Admiralty work, it is only short-term work and the skills which are going into the Polaris submarine base and these other activities will ultimately and inevitably lead to an unemployment problem in Scotland which will leave the shipbuilding industry derelict. It will create a tremendous unemployment problem in four or five years' time. Consequently, I hope that the Minister will not say "The project brings some kind of work to Scotland and so is justified".
There are other questions I want to ask. We are told that the work on the project requires so much security that the American system of positive vetting is to be applied to the workers likely to be employed. What is this likely to lead to on Clydeside? There we have a healthy tradition of trade unionism. It is likely that some of those who may want jobs on the project have at some time or other been militant shop stewards or even connected with the Communist Party. Then they will be positively vetted according to some American security plan.
This project will lead to a considerable amount of industrial trouble. It will not be a good scheme for absorbing unemployment and will not help us to build up the kind of industry that we need. It will present a tremendous problem to the west of Scotland. In the event of nuclear war it will make that part of Scotland the most dangerous place to live in in the world. If nuclear war were to start, and rockets and hydrogen bombs were dropped, inevitably it would be wiped out.
That is a reality, because in war a base means a bomb. Just as we bombed German submarine bases in the last war, inevitably, if the Russians see the possibility of these nuclear submarines going around the coast of Russia and being in a position to destroy Moscow or Leningrad or other Russian cities, the Russian megaton bombs will descend on the places from which those submarines come.
It is nonsense to talk about this being a defensive operation. It is part of a political improvisation by the Prime Minister in a moment of difficulty with his defence programme. It is a shortsighted development, and we are moving towards something which, from the point of view of expenditure, may prove to be the bottomless pit.

10.16 p.m.

The Civil Lord of the Admiralty (Mr. John Hay): The hon. Gentleman the Member for South Ayrshire (Mr. Hughes), in his customary inimitable style, opened by congratulating me on my new office with a somewhat backhanded compliment. He suggested that those who are concerned with security in the Admiralty might look at me rather askance when T came in and wonder whether I was a security risk. Whatever look they may have given me, I wonder what look they would give the hon. Member if he took up the same post.
His views on the general question of nuclear disarmament are well known, and I hope that he will forgive me if I do not traverse all the ground that he covered tonight. I look forward to doing so on another occasion. I want to say something about the Polaris programme, because this Adjournment debate gives me an opportunity which has not so far been given in this House to do so.
First, I remind the House what a major effort this programme represents. Few people realise—and until I got to grips with it I did not realise—how big these nuclear submarines will be. The boats which carry the Polaris weapon are nearly twice as big as any other British submarine ever built. Indeed, they are bigger than many pre-war cruisers, and will displace over 7,000 tons. Even if they were surface vessels they would represent a sizeable shipbuilding commitment.
There has been much ill-considered and even alarmist criticism of the Polaris programme, much of which has stemmed from a lack of appreciation and—dare I say it—a refusal to acknowledge the basic facts relating to the value of this system as a deterrent to possible aggression. The nuclear submarine is not—as some defence commentators, from the depths of their armchairs, have assured us—just an improved submarine. It is the first true submarine. It is a vessel which is completely unfettered by the need to surface for very long periods of time, and whose underwater endurance is virtually unlimited. From time to time the right hon. Member for Belper (Mr. G. Brown), the right hon. Member for Smethwick (Mr. Gordon Walker) and the hon. Member for Leeds, East (Mr. Healey) have said that the system is obsolescent. This is twaddle. The nuclear submarine, with

its speed, operating depth and freedom to evade, has an ability to remain undetected which is unmatched by any system yet devised by man. No antisubmarine break-through can be foreseen, and we expect Polaris submarines to remain virtually invulnerable for many years to come.
From time to time there have been knowing references to the possible development of anti-missile missiles. Let me assure the House that the problems of anti-missile defence are immensely greater that those of the attacker, and they can be aggravated by the use of decoys. Even if a proportion of the Polaris missiles should be destroyed, an enemy would be unable to rely on avoiding an unacceptable level of damage to his own territory. I fully realise that this applies to the entire concept of deterrence by means of long-range missiles with nuclear warheads. But Polaris submarines have the added and unique advantage of being able to launch their missiles from variable positions which are quite unknown to the enemy. It is not the case, as was suggested by the hon. Member for South Ayrshire, that in the event of a war against the Soviet Union our Polaris submarines would be operating only off the Russian coast. The whole wide world would be their ground, because Polaris submarines operate invisible to the eye and invisible to radar beneath the sea which covers three-quarters of the earth's surface. They combine the advantages of land-based ballistic missiles with the flexibility of air launched missiles and they have the disadvantages of neither.

Mr. Archie Manuel: Is the hon. Gentleman suggesting that this is the ultimate deterrent?

Mr. Hay: No, Sir, I am not. Because I think it unlikely in the history of mankind, until such time as we are able to achieve a lasting peace, that anyone will find the ultimate deterrent But I would say, and I believe this to be true, that with this weapon we are coming very close indeed to the ultimate deterrent.
In considering the best way to provide support for the Polaris force we had to place emphasis on the operational requirements and then, given this, on economy. The House will be aware that the basic operational requirements are that


the base should be near deep water; that navigational access shall be easy; that is shall be accessible by land and sea for logistic purposes; and that its associated armament depot shall be no more than a short distance away by sea.
We had to take into account other important factors, such as the distance from the refitting base and the provision of amenities and recreational facilities for the submarine crews when they return to harbour after their long submerged patrols. Of all possible sites—and we were at great pains to consider the claims of all locations including island sites—

Mr. Manuel: Ireland?

Mr. Hay: No, island sites—not Ireland.
We finally came to the conclusion that Faslane not only offered the greatest operational advantages, but also met the many other important requirements which I have mentioned.
I have already said that while the operational requirements must be met, we are also concerned to get an economic solution. For example, there is no doubt that we would get the maximum operational flexibility by using a depot ship as the base for the Polaris force, just as the Americans are doing at Holy Loch, and we considered this. But it would not be economic. A depot ship would still require the backing of the armament depot and would also need some limited but essential shore support. We are satisfied that we can get all the operational flexibility we need for operation in the N.A.T.O. theatre from the shore base at Faslane at the least expense in terms of both money and naval manpower.
The House will perhaps be interested to know that our provisional estimates of the cost of the Polaris programme—the hon. Member spoke of money—indicate that the annual cost of a force of four boats and all their support including refuelling costs and based on a spread of the capital cost over 20 years, is likely to be about 3 per cent. of the annual defence budget. I suggest to the House that this is not a heavy bill for running a deterrent force—

Mr. Willis: It is £60 million.

Mr. Hay: —particularly one which will be flexible, invisible and virtually invulnerable. In fact it is an exception to the rule that the best must invariably be the most expensive. The submarine is, and always has been, an extremely economical weapon. In terms of manpower we reckon to need about 400 civilians, including 200 locally recruited, to run the base and the armament depot. There will be around 1,700 officers and ratings stationed at the base to man the boats on a two-crew basis, which of course we must have to get maximum operational time at sea.
As to the base itself, the periodical refits of the boats, as has already been announced, will be carried out at Rosyth, where the nuclear hunter-killer submarines will also refit. There will be, of course, also a certain amount of maintenance work which will have to be carried out on the Polaris submarines during the turn-round time at Faslane between patrols. The operating schedule for the Polaris submarines is a tight one, and the operating base will in consequence be largely self-contained for maintenance purposes, but Rosyth is near enough to give overland support to the base if this should be necessary at any time.
The missiles themselves will be maintained and stored in the armament depot at Coulport; they will not be in the submarine during refit and docking periods at Rosyth and will not be handled either there or at the operating base. Although British crews will be highly trained and will have had practical missile firing experience in their own submarines before proceeding on patrol, these live firings will not take place in the confined waters round the United Kingdom. The launching system will be tested on occasion in exercise areas at sea, but this will be using inert test vehicles.
I do not propose to cover some of the other points which the hon. Member asked about because I feel that they go somewhat wider than the actual subject of the debate, but at one stage in his speech he went into the question of whether we were wasting resources by proposing the construction of this base. Apart from the building of the submarines, almost the whole of the Polaris programme is to be carried out in Scotland. Construction of the operating base


at Faslane to meet the needs of the Polaris submarines and building the armament depot at Coulport will together be one of the largest capital schemes in Scotland for some years. They will cost between £12 million and £15 million for construction work alone and can be reckoned to provide, at the peak, employment for 1,000 workmen.
It will not be the case that the men who will be called upon to carry out this construction will automatically be lost to other forms of construction particularly of housing, schools or hospitals or other important pieces of social equipment in that area of Scotland because, I am advised, much of the construction will be of a technical nature and of a civil engineering character rather than a building character. We do not expect, therefore, to use quite the same sort of labour as is used, for example, on house or school building. Moreover, it has to be borne in mind that there have been complaints for some time about the level of unemployment in south-western Scotland. I think, therefore, that this particular injection of activity and money which we are making in this area would not altogether come amiss.

Mr. Tam Dalyell: Some of us tell our constituents that, given a choice between building and servicing Polaris and being unemployed, we would rather see them unemployed.

Mr. Hay: I am sure that that remark, which perhaps the hon. Member may come to regret—

Mr. Dalyell: I have said it in my constituency.

Mr. Hay: —will be taken note of in the proper quarters. I am sure that some of my hon. Friends will wish to make sure that it is widely disseminated. This is not a case of our trying to undertake an activity which is contrary to the best interests of this country. As I tried to show in the opening remarks I made to the House this evening, this is intended to give this country a means of defence, one of the most powerful means of defence that is known to man at present, and certainly the most powerful this country has ever employed or ever possessed. That, I should have thought, taking things by and large, was not an activity which should be rejected and despised by the people of this country, whether in Scotland or elsewhere.
Of course, if the world were perfect we should be only too glad to devote our resources to more productive things, but it does not lie only with us to decide the world in which we live. We can do our best, but we cannot always succeed. I believe that this programme is a major contribution to the peace of the world, and I hope we shall continue to have the support of the House as a whole for this undertaking

Question put and agreed to.

Adourned accordingly at twenty-nine minutes to Eleven o'clock.